LatAm Bonds

DCM bankers say that Petrobras must comply with its intention to release third quarter results on January 27 to give bond investors the stability necessary for issuance from the country to resume.

Oil company Pemex and its owner the Mexican government each set different records with their inaugural bond issues of 2015 — and the first two of the year from Latin America — as plummeting US Treasury yields offset the effects of extreme market volatility for investment grade borrowers.

DCM bankers covering Latin America say that Mexican state-owned oil company Pemex may be the next borrower from the region to issue debt after the Mexican government’s successful bond market outing on Monday.

Mexico reaffirmed its status as one of the best EM borrowers on Monday after raising $2bn of new money and refinancing a further $2bn through an ambitious dual-tranche switch trade on another rocky day for markets.

Brazilian construction company OAS’s decision to default on its local and international bonds as a way of preserving liquidity amid its implication in the Petrobras corruption scandal has “set a bad precedent for Brazilian engineering and construction corporates that will heighten contagion risk”, said Fitch on Friday.

Latin America’s issuers took full advantage of an unexpected rally in US Treasuries to post another record total in 2014. But with more negative headlines in Brazil and lower energy prices to contend with, will fundamental concerns temper bond markets? Olly West reports.

Venezuelan debt traded up two points on average on Thursday, as oil steadied, as traders say it continues to be the closest to a pure oil play available in the sovereign bond markets. But president Nicolás Maduro’s attempts to negotiate the drastic fall in revenues from the lower oil price continue to disappoint investors.

Cross-border bond markets remain effectively shut to Brazilian issuers until there is more clarification on the Petrobras corruption investigation, said DCM bankers this week as construction firm OAS missed a bond payment as a direct result of what is being called the car wash scandal.

No Latin American borrowers sold international debt so far this week and none look likely to on Friday, 9 January, as the region lags the rest of EM in getting its 2015 issuance starting. But although it will take a while for Brazilian issuance to begin, a day and a half of strong trading sets the rest of the region up nicely for next week, with Mexico unanimously expected by bond bankers to be first up.

DCM and syndicate bankers covering Latin America say that the Mexican sovereign is almost certain to be the first from the region into the dollar market in 2015 — as has become traditional in recent years.

Nearly all of Chilean pharmaceutical company CFR’s bondholders accepted the terms of a tender offer for its outstanding notes, and those who bought the bonds in early 2013 have reason to celebrate.

Brazilian engineering and construction group OAS was hit by a triple downgrade on Monday after missing a January 2 $16m coupon payment on its $400m of senior unsecured bonds that mature in 2021.