Brazil’s sovereign bonds and credit default swaps widened by around 30bp Wednesday after Fitch stripped the sovereign of its investment-grade rating and lowered the credit to BB+.
It was the second downgrade to junk after a similar move from S&P in September, and will further complicate the troubled financial picture in Latin America’s largest economy.
Brazil’s US dollar bonds were 2.5 points lower at the long end of the curve and about 1.5 points lower at the belly after the move, according to a sovereign bond trader in New York.
Its 2025 notes traded down to a mid-price of 83.25, while the 2045s were quoted at 67.5.
The country’s five-year CDS mirrored that move, widening by 33bp to a mid-price of 487bp, although many market participants noted that the downgrade had been expected.
Brazil Energy Insight 
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