New York (HedgeCo.net) – Verde Asset Management, the largest hedge fund in Brazil with approximately $7.9 billion in assets, has been adding to its holdings of Petroleo Brasileiro (NYSE: PBR) debt, but is issuing cautious statements about the state-controlled oil company at the same time.

In a letter to investors issued on Monday, Verde stated that they had started adding to a net-long position in bonds of Petrobras back in September as they felt like a fall in prices and rise in yields were overdone. The yield on the March 2024 6.25% bonds has surged in recent months, rising from 8.15% to 9.75% from the end of August through the end of September.

The yield peaked at the end of September, but even the short-term bullish outlook on the price of the bonds came as investors fled the bonds due to a corruption scandal. Even as the bonds have rallied in October, Verde stated, “In spite of that, the company still continues to spark worries, especially because of the highest leverage of its balance sheet,” the letter said, referring to Petrobras. “The solution isn’t simple or easy, but we do not see there is the necessary urgency to deal with it.”

Rick Pendergraft
Research Analyst
HedgeCoVest