Central America

It’s that time of year when analysts dust off their crystal balls and make predictions for the next 12 months. In December 2015 not many were forecasting that Britain would vote to leave the EU, and even fewer were betting on a Donald Trump presidential victory, so investors would be wise to treat such missives with caution. Political risk is a capricious beast, even for the most seasoned market observers.

Fitch has partially blamed Donald Trump’s election as US president for hurting Mexico’s economic prospects after it became the third major rating agency to place the sovereign’s credit rating on negative outlook this year.

Mexico’s Pemex put smiles on the faces of bankers and investors with a $5.5bn triple tranche bond issue on Tuesday, the first Latin American bond to be sold in the US since before the US election.

Latin American bond bankers believe that Tuesday’s triple tranche bond issue from Pemex is likely to have been the last cross-border deal of the year from the region, even though the bonds provided further encouraging signs with a strong aftermarket performance.

Mexican state-owned oil giant Pemex responded to Mexico’s impressive first competitive deep-water oil auction by reminding investors of its prowess in markets with a $5.5bn triple tranche bond.

Latin American issuers again showed no interest in cross-border new issue markets this week as Mexican retailer and financial services company Grupo Elektra said it would use domestic bonds to prepay dollar bonds.

The government of El Salvador finally looks ready to issue a much needed international bond to refinance short dated debt, but there is concern that the deal will be only a temporary solution to the country’s liquidity problems.

Market participants are expecting tense discussions after Belize’s government said it would look to restructure its 2038 “super” bond even though there is some debate as to whether a restructuring is really necessary.

Senior Latin America DCM officials at some market-leading bookrunners said this week that they feared there would be no more dollar issuance from the region in 2016, although a couple of dissenting voices thought one or two issuers may “panic” and attempt to issue.

Central American development bank Cabei added a 20th currency to its bond issuance portfolio on Thursday with a 10 year debut in Australian dollars as niche currencies dominated the post-US election activity in Latin America.

Creditors of Central American sovereign Belize are understood to have formed a committee to deal with a possible second restructuring of the government’s bonds in four years.

Central American development bank Cabei will look to price its first Australian dollar bond on Thursday after announcing price guidance of 180bp over ASW for a proposed 10 year deal.