LatAm Bonds

A sharp sell-off in Argentina’s international bonds is likely to have a major impact on the government’s attempts to restructure nearly $70bn of debt, but there was disagreement as to whether lower secondary prices would make life harder for the borrower.

One of the worst ever weeks in markets spared no asset class, and investors warned that Latin America’s mostly commodity-oriented economies were in a particularly bad spot as the region’s oil producers led EM losses in both corporates and sovereigns.

President Lenin Moreno’s announcement of austerity measures that could raise $2.25bn, as well as the possibility of cheaper bank loans, was not enough to stop Ecuador’s bonds plunging towards the 40 mark as oil prices fell further on Wednesday. But the sovereign is expected to make a $350m coupon payment on March 24 and some are seeing signs of encouragement in the government’s reaction.

Moody´s slashed Bolivia’s credit rating from Ba3 to B1 and placed its outlook on negative as it warned of a “material erosion” of the landlocked country’s fiscal and foreign exchange reserve buffers in recent years.

The Inter-American Development Bank officially postponed its Annual Meeting from March until early September on Tuesday, confirming what many potential attendees had expected.

Bond syndicate bankers covering Latin America were not ruling out a return of new issuance in the next two weeks as the market tone improved on Tuesday after a bleak Monday. But with fears around negative fund flows growing, it may be hard to persuade investors to put cash to work even if valuations look attractive.

On what some EM investors described as the worst day for markets since 2008, Latin American bond buyers were left staring at a sea of red as the region’s fixed income markets were stunned into dysfunction by the sharpest fall in oil prices since 1991.

The Province of Buenos Aires said on Monday that it had hired Bank of America and Citi to advise it on its debt restructuring.

Mexican hotel operator Grupo Posadas became the first Latin American issuer to suffer a ratings action as a direct result of the Covid-19 coronavirus outbreak, with both tourism industry and capital markets conditions worsening while a bond maturity looms.

Even as yields in Latin America’s top-rated credits reach all-time lows amid a US Treasury rally, volatility will likely prove too tricky for most of the region’s issuers to navigate primary markets in the short term, said bankers.

Holders of Argentine sovereign bonds have until March 16 to identify themselves to the issuers as the government prepares to restructure $67bn of foreign law sovereign bonds.

Mexican non-bank lender AlphaCredit has launched a consent solicitation, as it seeks to make amendments to the indenture governing its 2022 notes.