Viva la fiesta: LatAm mart awaits primary afterparty after record year for bonds

Latin America bond bankers have enjoyed their busiest year so far in 2025 and by quite some margin. This is perhaps why most respondents to GlobalCapital’s survey of LatAm bond bankers for 2026 foresee a quieter primary market — albeit still very busy compared with past years.

International bond issuance in Latin America and the Caribbean stood at $172bn-equivalent as of November 10, according to Dealogic. This was streets ahead of last year’s $112bn and the previous busiest year by that date, 2017 with $138bn, also fails to come close.

There will be a contraction of 10%-20% in LatAm and Caribbean international bond volumes in 2026 versus this year, say 43% of respondents. One predicts a 0%-10% drop while there was some optimism from two bankers, one of whom foresees a 0%-10% rise and the other a 20%-50% increase in volumes.

Even the more pessimistic bankers still expect a very busy year by historical standards. A 20% drop from this year’s year-to-date volumes would mean about $137bn of issuance by November 2026, much higher than 2024 and a fraction below the record year before 2025.

The lack of optimism among most bankers that growth in LatAm and Caribbean issuance can continue is linked to an expectation that issuance conditions are likely not going to improve next year. The majority see conditions remaining the same or becoming more difficult.

There is some agreement on market access in 2026: four bankers think it will stay about the same, but three predict it will widen to allow more issuers in.

“Issuance conditions will likely be favourable,” says Jeff Grills, head of US cross markets and emerging markets debt at Aegon Asset Management in Connecticut. “The expectation is that the Fed will keep lowering rates, which should bring down all-in yields. It’s hard for conditions to be too much better given how tight spreads are, but even if spreads widen for issuers, there should still be an attractive primary market with yields remaining low. There’s a lot of money looking for a home.”

There is little consensus among bankers about the prospects for LatAm and Caribbean sovereign issuance in 2026. The most popular choice is that it will fall by 10%-20%, but three bankers think it will rise, and one by 20%-50%.

“Colombia and Mexico are really interesting for 2026,” says Jared Lou, EM debt portfolio manager at William Blair in New York. “What are the latter going to do? Are they going to do more big P-caps for their oil franchises? And with Colombia, they will have to issue in an election year.”

Mexico’s July pre-capitalisation (P-cap) trade on behalf of debt-ridden state oil firm Pemex was the first of its type by an EM sovereign. It eased some of Pemex’s near-term debt woes, but a lot more work is needed to get the company’s debt on a stable footing.

The wildcard is Argentina, thinks Grills, who predicts higher sovereign issuance in 2026, perhaps between 10%-20%. Ecuador may also return to markets, he adds.

“Argentina does need to get some things right for more issuance to materialise,” he says, not long after president Javier Milei notched a stunning victory in October’s mid-term elections.

This win prompted a huge bond rally and investors are hopeful he can press on with a reform programme to correct Argentina’s many, and very long-standing, economic challenges.

Also cheering investors is the government securing a lifeline in October in the form of a $20bn currency swap line with the US.

It is clear that the Argentinian government would like to access the primary market to refinance bonds maturing in a few years’ time, says Lou. The government faces a hefty amount of debt to repay in 2026, nearly $20bn, and fears that the serial defaulter will do so again have not gone away, even with the optimism over Milei’s reforms.

“From the perspective of multilateral lenders, the preference is for Argentina to access market debt, if possible,” says Lou. “They’re basically there with the front end a little under 10%, so if they can get closer to par and make the January payment, showing willingness is there to repay, they should be able to refinance in 2026.”

On the corporate bond front, there is positivity about prospects for issuance in 2026. Just one respondent thinks issuance volumes will drop, with most predicting an increase, although none think it will increase by more than 20%.

For financial institution volumes an equal number of respondents think that supply will either drop by up to 10% or stay the same, with three respondents predicting a rise of up to 10% in FIG issuance.

“Barring unforeseen events, we expect 2026 volumes in LatAm corporate issuance to grow in 2026,” says Alan Siow, co-head of EM corporate debt at Ninety One in London. “Year to date in 2025 we have made new highs in EM corporate issuance, excluding China, and we expect this trend to continue.”

One interesting aspect of 2026 primary issuance for LatAm and Caribbean corporates is de-dollarisation, he continues, suspecting that there will be a continued rise in issuance outside dollars: in local currencies or the euro.

An area to watch for the corporate market in 2026 is Brazil. Major bond sell-offs in the autumn stung EM corporate investors. Two companies, waste management firm Ambipar and petrochemicals firm Braskem, brought in advisers to review their debt and the contagion spread to oil and gas company Raizen, although that firm’s bonds recovered some of their losses.

“The special case to watch is Brazil,” says Siow. “Bondholders will evaluate whether the behaviour of key Brazilian institutions such as Petrobras and the banks in the high profile Braskem situation leads to a test of Brazil’s reputation in the eyes of foreign investors.”

Brazil gave EM corporate bond investors a reminder of the risk of the “so-called cockroaches” out there, says Grills, referencing JP Morgan chief executive Jamie Dimon’s October comment that when one company goes under, there are usually more to follow.

Siow expects issuance conditions to remain supportive for LatAm and Caribbean corporates, particularly if the Fed keeps cutting rates. Beyond Brazil, Argentina is the other area to watch.

“Further explicit support from the US administration may further ameliorate funding access for both the sovereign and corporates in Argentina,” he adds.

One of the key reasons for this year’s turbocharged primary market in LatAm and the Caribbean is how tight spreads have been for issuers. They have hit tights not seen for many years, drawing issuers to the market in droves.

What happens to bond spreads next year is important for issuance volumes. If they widen, the impact on all-in funding costs may be negligible if US base rates are lower. And if spreads can stay around where they are while rates fall, that creates an even better market for issuers.

The tight spreads of 2025 are reflected in LatAm bond banker expectations for 2026: no respondents forecast tighter spreads. Some think they may stay the same, but the majority foresee them widening by up to 20%.

There was little agreement among investors on sovereign spreads in 2026: Grills sees them a bit wider, while Lou a bit tighter. Grills is worried about equity volatility and when US tariffs might bite.

“But spreads are always difficult to predict,” he says. “We’re at near two-decade tights for LatAm sovereign spreads, and while I am not worried about any wider crises, there are high fiscal deficits and high issuance needs, so I could see spreads widening. The balance of risks means it’s hard to see spreads going much tighter.”

“There’s a lot of pressure in the US for lower front-end rates, and the next Fed chair in 2026 is likely to be someone with views more in line with the president’s on rates,” adds Lou. “We expect lower front-end rates and accommodative conditions, with sovereign spreads a bit tighter in LatAm.”

Things are “a little more interesting” on the corporate side, adds Grills, who says if sovereign spreads go wider then so will corporates, adding that investors have had a warning on corporate spreads in Brazil. Siow predicts corporate spreads to range between 300bp-350bp, similar to 2025.

The prospect of lower base rates raises the question of whether issuers, particularly sovereigns, will look to tap the longer ends of the curve in 2026. Bankers expect them to do so: only one think maturities will stay about then same, with the rest seeing them go longer.

There have been 30 year dollar bonds this year from Brazil, the Dominican Republic, Guatemala, Peru and Mexico. But the majority of issuance has been in the shorter end and belly of the curve.

Siow and Grills agree with bankers that maturities may extend. The former predicts that corporates will issue longer debt in the event of a “significant” tightening of US Treasury yields, while Grills is “inclined to say it’s going to maybe get a little longer”.

Not every investor thinks LatAm and Caribbean issuers are going to be issuing longer dated paper, however.

“Sovereigns will likely have to issue shorter debt,” says Lou. “To go longer at the 30 year point, for example, they would likely have to offer a significant premium due to the low cash prices and the credit risk. A lot of issuers won’t be willing to do that.”

There is one part of the LatAm and Caribbean primary market that has not enjoyed a strong year: environmental, social and governance (ESG) issuance, the supply of which has dropped to just $13.8bn from $29bn this date last year, according to Dealogic.

ESG issuance — defined as bonds with a green, sustainable or social label — made up 8% of LatAm and Caribbean issuance as of November 10. This is a big drop from the 26% by this date in 2024. The decline coincides with the first year of Donald Trump’s second term as US president. He is an outspoken sceptic of man-made climate change and his administration has attacked ESG investment.

LatAm bankers do not see ESG issuance becoming more of a priority for issuers, and several think it will become less so. The same is true for whether ESG will be a priority for funds, although one thinks it will become more important for investors.

Siow is bullish on ESG issuance and says it will remain a priority for issuers in 2026 with “no evidence” that there is a decline in interest.

“While we cannot speak for other funds, ESG remains an important and integrated part of our underwriting process and we do not expect this to change,” he says. “But we have witnessed a slight decline in the ardour in which ESG is pursued by certain market participants, particularly in certain jurisdictions where such considerations have become increasingly politicised.”

The year’s rip-roaring primary market in LatAm and the Caribbean region has come despite volatility throughout the year. Trump’s tariff announcement in April caused a market shock and geopolitical concerns, notably in the Middle East and Russia-Ukraine, have not gone away.

There are plenty of threats to issuance in 2026 and while the spectre of 2022, a torrid year for EM debt, may be disappearing into the past, there are reasons to be worried about whether this year’s pace of issuance can be sustained.

Bankers picked a range of greatest threats to LatAm and Caribbean issuance in 2026, but the most popular is volatility in US rates. Also worrying bankers is economic performance in China, presidential elections in LatAm, wider market volatility related to US politics and the unwinding of the AI trade, prompting an equity market sell-off.

For Lou, the main threat is inflation and rates in the US, while Grills identifies two main concerns: a “significant” reversal in equity markets that sours the wider mood or a recession, with the first more likely.

For Siow, the greatest dangers to primary are idiosyncratic risks, that if left unchecked could lead to a broader disruption in the market, and the US administration’s foreign policy in Latin America and the Caribbean.

“If I am wrong that we are to get someone more accommodative at the head of the Fed, then things may get challenging,” says Lou. “The market will likely close to some issuers and if US inflation and rates start going higher again, then issuance for the rest is likely going to be more challenging.”

“When external markets are bad, whether worries about AI spending or negative equities, it’s usually bad for LatAm bonds,” adds Grills.