Holders of Petrobras' new US$6.75bn two-part bond are fuming - and who can blame them? Multi-point drops on both the five and 10-year bonds, just a day after pricing, require some explaining. A surprisingly hawkish tone at the US Federal Reserve, and Brazilian Finance Minister Henrique Meirelles' apparent reluctance to pump more money into Petrobras, certainly weighed on market sentiment - but not enough to justify the dramatic sell-off in the state entity's bonds. The blame is falling squarely on underwriters, who appear to have misread demand and pricing for the 10-year. A final yield of 9% certainly looks juicy against other oil names and Brazilian sovereign debt, but less so against a five-year bond that paid a yield of 8.625%.
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