LatAm Bonds

Mauricio Cárdenas, Colombia’s finance minister in 2012-18, has told GlobalCapital that emerging market nations would struggle to raise the financing required to fund measures to treat the Covid-19 pandemic and consequent economic slump. “Difficult years are coming” for EM, warned the former official.

Development lender the Central American Bank for Economic Integration (Cabei) raised $170m-equivalent of three year money on Tuesday after heading to the Mexican bond market, where investors see the bank as a haven credit, the bank’s CFO told GlobalCapital.

Mexican petrochemicals company Grupo Idesa is offering bondholders a collateral package and higher coupon to participate in a bond exchange that would allow it to avoid default later this year.

Ecuador will make a $325m bond maturity payment on Tuesday as it looks to unlock $2bn of further funding that the finance minister will be “immediately” accessible. But the sovereign will delay $245m in coupon payments later this week, and the minister did not confirm that these payments would be made when the new loans arrive.

Martín Guzmán, Argentina’s finance minister, said on Friday afternoon that the country was “ready to intensify interaction” with international bondholders ahead of a debt restructuring. But with authorities set to announce further spending to protect its people from the economic impact of Covid-19, the IMF echoed the government’s view that a fiscal surplus was unfeasible in the short term.

Colombia’s Ecopetrol became the first of Latin America’s big national oil companies to launch an action plan to combat the continued fall in oil prices as it looks to preserve cash.

Emerging market bond conditions got worse and worse this week as investors struggled to sell bonds quickly enough to keep up with outflows. Though some investors said they had lined up a shopping list of cheap purchases, it could be some time before they decide to pounce.

Even the top-rated emerging markets corporates are mostly preferring to keep cash on hand rather than take advantage of a sharp fall in bond prices to repurchase debt cheaply, bond bankers said this week.

Latin American governments looking to shore up their economies in the fact of the coronavirus pandemic generally have less room for fiscal stimulus than they did before the 2008 financial crisis, warned Fitch Ratings on Wednesday as the region’s bond markets plunged even further.

Colombia’s Ecopetrol became the first of Latin America’s major national oil companies to launch an action plan to combat the continued fall in oil prices as it looks to preserve cash.

Latin America bond issuers and investors were thrown deeper into the coronavirus crisis on Monday, with Friday’s spread tightening more than cancelled out as the US Federal Reserve’s surprise 100bp rate cut on Sunday failed to arrest a fall in risk assets.

Though Latin American bonds offered some consolation to investors on Friday, the relief is likely to be short-lived as the region buckles down to fully face the effects of the coronavirus pandemic.