South America

A continued rally in Brazilian bonds is giving DCM bankers in São Paulo some hope that issuance from the country may be on its way — although it will not be a flurry and volatility looks set to remain high for some time.

Fitch upgraded Argentina's local currency rating from CCC to B on Tuesday thanks to an improved policy framework, and predicted it would do the same to the government’s foreign currency rating once the country resumes timely debt service on defaulted bonds.

Raizen Energia, the Brazilian sugar and energy producer, will buy back nearly $200m of debt after bondholders gave a solid response to a tender offer.

Two more Latin America sovereigns could issue bonds soon as borrowers from the region make the most of improved market conditions.

Argentine state oil company YPF sold $1bn of five year notes at a new issue premium close to flat on Friday as the threat of an imminent flood of supply from Argentina did nothing to quell demand.

Real estate company IRSA CP this week became the latest Argentine issuer to raise debt in the international markets as bankers continue to work behind the scenes on the sovereign’s forthcoming return to markets.

The timing of Brazil’s return to bond markets last week was looking better by the day this week as the controversy surrounding the appointment and then suspension of former president Luiz Inácio Lula da Silva to Dilma Rousseff’s cabinet brought volatility back to the curve.

Latin American euro denominated issuance looks here to stay, no matter the arguments made against it by US bankers, after Colombia sold its first bond in the single currency since 2001 on Wednesday.

Another blow to credibility in Brazil sent the sovereign’s bonds tumbling on Tuesday after former president, Luiz Inacio Lula da Silva looked set to accept a ministerial position in Brazil’s government just a week after prosecutors requested his arrest as part of a corruption investigation.

Brazil’s emphatic return to international bond markets on Thursday was likely designed to encourage its non-sovereign issuers to the market, said Lat Am bond bankers, although some questioned whether these deals would materialise.

Votorantim Cimentos, the cement making arm of Brazilian conglomerate Votorantim SA, will buy back just €120m of its euro denominated bonds after most bondholders rejected the terms of a proposed tender offer. The company was hoping to buy back €350m.

Latin American debt bankers could not hide their delight on Wednesday evening after a remarkable day in new issue activity that included two heavily oversubscribed deals from high yield issuers that traded up in the grey.