Central America

Bond investors say that Honduras’s established relationship with the IMF should leave it in good stead as it looks to become the lowest rated borrower from Latin America to issue in the coronavirus era.

As the highest yielding sovereigns in Latin America — excluding those explicitly on the path to restructuring — bonds from El Salvador and Costa Rica have finally caught a strong bid. But fiscal fundamentals are deteriorating sharply.

For yield-hungry bond buyers, Central American sovereigns El Salvador and Costa Rica have proved irresistible in recent days. But as political infighting in both countries hampers fiscal consolidation efforts, fiscal fundamentals could cause creditors concern for years to come.

The Central American Bank for Economic Integration (Cabei) raised $530m-equivalent of debt in Taiwan and Switzerland this week to complete the bulk of its bond financing for the year, leaving the lender to focus on bilateral funding and further investor relations for the rest of the year.

Central American Bank of Economic Integration (Cabei) turned to the Taiwanese market on Wednesday, raising $375m just weeks after a $750m bond sale in the US.

Latin American bond bankers were hopeful that Cemex’s blowout bond issue on Tuesday could cajole other issuers into the market after the Mexican cement producer navigated volatile secondary market and a rating downgrade to notch a hefty order on the way to a $1bn seven-year bond.

The Central American Bank for Economic Integration (Cabei) is set to price a senior unsecured Formosa bond on Wednesday after tightening price discussions.

Mexican cement maker Cemex is likely to announce a new dollar bond first thing on Tuesday after holding investor calls on the same day Fitch downgraded the borrower and placed it on negative outlook.

After nearly two months of persuasion, Mexican petrochemicals company Grupo Idesa received the approval of its bondholders to push out some $300m of international bonds by six years and give major relief to its liquidity situation.

A supranational and a Nordic bank paid rare visits to the Swiss franc market this week. The North American Development Bank (NADB) printed its first deal in two years — its second green bond — while Nordea returned after a five year absence.

Central American sovereign Belize, which last restructured its international debt in 2017, is likely to seek to delay a $13m coupon payment due in August on its only external bond, believes Moody’s.

The top tier of emerging market companies and sovereigns are funding themselves at near pre-coronavirus levels, but there is stark inequality in the market. The vast majority of EM corporates will have to sit out a while longer as funding costs remain prohibitively high for triple- and double-B rated issuers, writes Oliver West.