LatAm Bonds

Generals, and financial regulators, are always fighting the last war. So it proved when the coronavirus slammed into international markets in mid-March. Many of the tools developed in the 2008 financial crisis were deployed to great effect by central banks. The corners of the financial markets that propagated weakness in 2008 passed the test of 2020. But new risks were thrown up, forcing a new round of improvisation. What lessons will be drawn from the Covid-19 crisis?

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.

Peru’s largest financial group, Credicorp, tapped international bond markets for $500m on Wednesday, becoming the first debut issuer from Latin America since the Covid-19 crisis began.

Bond investors and analysts expect Argentina to extend Friday’s restructuring deadline yet again amid continued promising signs that a deal is near, but some warn it is wrong to assume an agreement is a foregone conclusion.

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.

The US Federal Reserve’s whatever-it-takes approach to stabilising markets has had an unintended victim: serious discussions about debt relief in the emerging markets.

A group of institutional investors owning bonds issued by the Argentine Province of Córdoba has hired BroadSpan Capital and Mens Sana Advisors as financial advisors as the province works on a restructuring of its $1.685bn of international bonds.

Peru’s largest financial group Credicorp tapped international bond markets for $500m on Wednesday, maintaining a robust order book even as it tightened pricing by more than 50bp.

With bondholders mobilising ahead of a debt restructuring, Ecuador’s bonds have enjoyed a strong rally on the back of the borrower's perceived goodwill to the markets. But the government faces a delicate task in executing a restructuring.

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.

Bond buyers are showing interest in Peru’s nuevo sol denominated paper amid a sharp increase in EM risk appetite, according to the government’s public treasury director, even as Fitch downgraded the sovereign’s local currency debt rating last week.

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.