Prudential Says Latin America Bonds Attractive, Pemex a Standout

  • Says valuations signal Latin America bonds will outperform
  • Argentina tops Brazil for sovereign investors, Prudential says

Prudential Financial Inc. says debt from Latin America is still attractive after a rally this year, with bonds from Petroleos Mexicanos SA and sovereign securities from Argentina among the most alluring options.

David Bessey and Cathy Hepworth, money managers who help oversee $26 billion in emerging-market debt at Prudential Financial, said that the extra yield investors get to own Pemex debt instead of government notes represents a “really good value.” Changes in governments in Brazil and Argentina will drive further gains for those countries, with more upside seen for the latter because there are fewer political obstacles, they said.

“Latin America broadly still has enough cheap assets that it will continue to outperform for the rest of the year,” Bessey said in a May 25 interview. “Interest rates globally will stay pretty low for an extended period of time. That ultimately drives investors to higher yielding assets like EM bonds.”

In Brazil, local bonds are attractive, particularly those with longer maturities and notes that are linked to inflation, Hepworth said.

Overseas sovereign debt from South America and Central America has gained 11 percent this year, the best performing emerging-market region in data complied by Bloomberg.

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