But some question the sustainability of the Brazilian rally given that the economy is expected to shrink almost 4 percent this year.
"2016 is probably a bit early to buy into the reform story," said Charles Robertson, global chief economist at Renaissance Capital. "Weak (economic growth) has a grinding effect on people's solvency, and at some point that blows up."
He drew parallels with U.S. coal company Peabody, which after the coal price collapse found itself unable to service its debt and filed for bankruptcy in April.
"It wouldn't surprise me if we saw that happening in Brazil," he said.
The rally in distressed names has been partly fueled by inflows into emerging bond funds, which according to BAML have attracted $9.2 billion over the past nine weeks.
Now some managers are worried that the market has got ahead of itself, with little discrimination between highly levered companies and those with strong balance sheets.
"It almost seems as if people are just buying risk, it's not (because of) improving fundamentals," said Kathy Collins, an investment manager at Aberdeen Asset Management.
"It's something we're debating internally at the moment -- is it time to cut a bit of risk because the next leg is going to be down?"