LatAm Bonds

Prices in Venezuela and PDVSA bonds remained stable in the secondary markets this week, despite US sanctions on new debt issuance, as bondholders appear none the wiser as to the next step in the country’s economic crisis.

Brazilian mining giant Vale is looking to make the most of a better than expected cash position to redeem its 5.625% 2019s and buy back 4.625% 2020s through a tender offer.

Fitch downgraded Venezuela by three notches on Wednesday, saying that the imposition of US government sanctions on the country further reduced its financing options.

Peruvian plastic packaging company San Miguel Industrias is looking to issue new debt to refinance its only existing international bonds, which mature in 2020.

Bonds issued by Venezuela and its state-owned oil company PDVSA recovered ground after US president Donald Trump issued an executive order prohibiting the trading of new debt issued by the entities.

Brazilian mining giant Vale looks set to continue to reduce its debt by redeeming its 5.625% 2019s and via a tender offer of its 4.625% 2020s.

Venezuela’s bond market access is already negligible. If market participants want to take a moral position, they need to think about more than just new issues.

Venezuela and PDVSA bonds regained some ground on Thursday as reports that the US would implement a blanket ban on trading the securities appeared to be exaggerated. But the bonds remain near all-time lows as the market weighs up the possibility of US sanctions against the crisis-ridden nation.

There were no new bond issues from Latin America this week, but one EM syndicate banker claimed to be “brutally busy” pitching for September as market participants said Brazilian and Argentine issuers are likely to dominate new issue activity.

Some EM bond investors said that they were interpreting the drop in Venezuelan bond prices on Wednesday as a buying opportunity, saying that it was unlikely that the US would block all trading in the securities.

Chilean copper miner Codelco completed the second leg of its tender offer on Tuesday, bringing the total amount of debt that it has repurchased using proceeds from last month’s new issue to $2.357bn.

Investors were unperturbed by the first outflows from EM funds since 2016 last week, adding that some sources still recorded inflows, but noted that after good returns this year, they were happy to take less risk for the rest of the year.