Economics & Strategy: Corporate Debt – First
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Economics & Strategy: Corporate Debt – First

In first place for a second straight year — and for the third time in four years — is Itaú BBA’s quartet captained by São Paulo–based Ciro Matuo

Ciro Matuo & team Itaú BBA


The buy side says: “Ciro is my first call when I look for corporate-debt advice in Brazil.”


In first place for a second straight year — and for the third time in four years — is Itaú BBA’s quartet captained by São Paulo–based Ciro Matuo, who also co-leads (with Ilan Goldfajn) the No. 2 team in Local-Markets Strategy. Brazilian dollar-denominated corporates have returned, on average, 6.5 percent in the first half of the year — up from 5.8 percent in the same period last year, and 200 basis points ahead of a comparable basket of seven- to ten-year U.S. Treasuries — but the team doesn’t expect spreads to tighten significantly for the remainder of the year. “In light of the strong and above-average returns achieved by the Brazilian corporate-bond asset class so far this year — and with a still far-from-resolved sovereign-debt situation in Europe, which keeps putting further weight on global and local growth — we expect investors to maintain a cautionary stance on adding risk and/or illiquid assets for the remainder of the year,” explains Matuo, 39. Nonetheless, the strategists note that the instruments continue to offer positive yield and spread pickup to similarly rated U.S. corporates. Top securities include the 11.75 percent 2022 bonds of Grupo Virgolino de Oliveira, an ethanol and sugar exporter; the 12.25 percent 2022 notes of Minerva, one of the country’s largest food processors; and the 9.75 percent perpetual bonds of BR Malls, which operates shopping malls throughout Latin America. “These credits combine superior alpha picking, conservative management, comfortable financial liquidity and a positive business outlook with some degree of insulation to global trade risks,” he says. Matuo “is one of the few local analysts who have been covering domestic corporate debt for quite some time with international quality in his research,” proclaims one money manager. — Thomas W. Johnson


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