Americas

Soaring prices in bond and equity markets have left investors vulnerable to a crash that could be triggered by an array of risks from corporate insolvencies to Brexit, the International Monetary Fund (IMF) warned on Thursday.

As investors search for opportunities in the chaos of the Covid-19 crisis, a gigantic special purpose acquisition company (Spac) from celebrated investor Bill Ackman has captured attention in the US. Spacs enable fund managers to raise capital to take minority investments in private companies. In the wake of the pandemic, equity market participants in Europe are wondering whether similar deals will emerge, writes Sam Kerr.

Bank bond spreads widened further on Thursday amid growing numbers of infections in Europe and the US. Deal arrangers say that issuers will need to be more careful about choosing the right issuance window as markets remain choppy.

Mexican real estate investment trust (Reit) Fibra Uno pulled a proposed dollar Eurobond issue on Wednesday as investors said they believed the issuer may have underestimated the importance of the bid from US Qualified Institutional Buyers (QIBs).

Uruguay raised $2bn-equivalent of debt on Wednesday — the bulk of which came from a rare inflation-linked local currency issue — to become the final investment grade Latin American sovereign to tap international bond markets in the coronavirus era.

DCM bankers said that Mexican personal care products maker Kimberly Clark de México (KCM) was from the ideal sector for this market after it tightened pricing on a new issue sharply despite a difficult day in global markets.

Bankers said that Chilean cable company VTR had catered for both emerging markets and high yield bond buyers as it raised $1.15bn of new bonds across two heavily oversubscribed tranches on Wednesday.

Popular discontent could well rise in many countries as the coronavirus crisis hits the poorest worst of all. In the past, unrest may have only worried government bond investors to the extent that it damaged creditworthiness. But, as market participants become ever more socially conscious, DBRS Morningstar’s Nichola James says that we can also apply an ESG (environmental, social and governance) lens to it.

Yandex, the Russian internet company, has raised $800m through a sale of new shares to US investors and a private placement to a consortium of Russian oligarchs and VTB Bank.

Mexican real estate investment trust (Reit) Fibra Uno’s plans to return to bond markets were shaken on Tuesday when the issuer delayed pricing “as part of company protocol” when an earthquake hit the country.

Uruguay-headquartered Navios South American Logistics on Tuesday notched a $500m 10-year bond that left the company with a far more comfortable debt maturity profile. But Navios had to improve terms for investors — and wait a week after it first announced the issue — to get the refinancing done.

The Covid-19 crisis, and particularly the equity rally since the bottom of the sell-off in March, should cause deep reflection for active fund managers at risk of underperforming if they stick to their principles.