Until late February, some LatAm bankers had been marking this week’s Fed meeting in the calendar as a potential turning point after what had been a tricky start to 2022. Russia’s invasion of Ukraine may have relegated US monetary policy down the list of investor concerns, but Wednesday’s policy announcement was still keenly watched.
It’s not like LatAm bond bankers have a great deal else to do, many are happy to admit. Finding issuers who are game to test the waters of the new issue market is proving a tricky task, they say. Even after a very welcome post-Fed rally, the assortment of bankers we spoke to on Wednesday evening were adamant that it would not be enough to entice any LatAm issuers on Thursday.
They were proven right: the new issuance hiatus continued. Still, the market traversed the obstacle that was the Fed’s rate rise with ease and the theory is that a few days of stability, accompanied by solid execution in US corporate bonds, may encourage some Latin American issuers to return to the fold.
Yet while LatAm DCM bankers fret over finding an issuer of high enough quality to reopen the primary market, action in CEEMEA on Thursday suggests they may be worrying unnecessarily.
Turkey (B2/B+) and Nigeria (B2/B-) felt like quite audacious choices to get EM up and running again, but both found decent demand. This left some hoping that — if an investment grade LatAm sovereign or corporate can’t be persuaded to do the honours — perhaps some of the high yield Brazilian corporates that GlobalCapital understands are lurking on the sidelines might take a chance on the primary market.
That two single-B rated CEEMEA issuers felt confident enough to charge into the market post-Fed, while LatAm borrowers are proving more shy, is particularly curious given that the narrative of Latin America as a safe haven from the conflict persists.
Investors who’d been at JP Morgan’s EM corporates conference in Miami last week said that LatAm’s potential to outperform was one of the major topics of discussion. As previously reported, the distance from Ukraine and lack of major trade links to Russia should stand Latin America in good stead compared to other emerging markets.
It makes sense to think that LatAm could be less affected than regions that are in closer proximity to Russia. But we reported this week that Fitch has rather poured cold water on the idea that the region would benefit from the conflict, arguing that LatAm corporates will face “elevated operating uncertainty”.
Sleeping volcano
Just as dormant as LatAm’s more traditional bond market are El Salvador’s plans to raise money to fund its Volcano-powered Bitcoin City. Conflict-driven volatility did at least provide finance minister Alejandro Zelaya with a plausible excuse as to why the country might not be able to issue its Bitcoin-linked bond in the initially proposed window of March 15-20.
There remains some uncertainty over how much El Salvador will actually be able to raise via its novel Bitcoin bond; mainstream LatAm bond investors are certainly not getting involved. Yet the sovereign’s rather distressed bond curve found something of a floor this week, and some credit analysts hope that the Bitcoin bond could provide a lift if it “reaffirms access to external liquidity”. The full story here.
Finally, congratulations to Cabei’s CFO Hernán Danery Alvarado on his imminent retirement. Alvarado has been at the Central American development bank, today the best rated borrower in Latin America, for every single one of its bond issues — going right back to its first deal in the Taiwanese market in 1996. After 28 years at the multilateral, his final day will be April 15.
Have a great weekend, and do get in touch for a free trial to access all of GlobalCapital.
Saludos,
Olly
This is GlobalCapital's LatAm Letter written weekly by Latin America reporter Oliver West. If you enjoy it, sign up for free in a matter of seconds here and feel free to pass it on to colleagues and contacts.
The best of this week’s LatAm bond coverage: