Petrobras, Bond-Market Pariah, Suddenly Captivates Deutsche Bank

For much of the past year, Petroleo Brasileiro SA’s unrelenting rout has pushed down bond prices to new lows day after day.

Now, Deutsche Bank AG is finally starting to see value in the state-controlled oil producer’s debt.

The strategy is simple: buy its $3.35 billion of notes due in 2017 — whose yields have more than tripled to about 8.7 percent — because Petrobras will have no problem paying its obligations over the next few years without government support.

But beyond that, yields still aren’t high enough to compensate for the risks tied to refinancing, the slump in oil and a weaker Brazilian currency, Deutsche Bank’s Eduardo Vieira wrote in a report dated Oct. 7. It’s the first time Vieira has recommended buying bonds issued by Petrobras since a bribery investigation involving company executives began in November 2014.

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