The market is betting on another 25bp rate hike from Mexico Friday, but Credit Suisse predicts that Banxico will wait. “We maintain our view that the central bank of Mexico (Banxico) is likely to leave the overnight rate unchanged at 7.75% in this Friday’s (18 July) policy announcement,” says Credit Suisse. “The central bank will choose to leave rates unchanged this time around and tighten instead by 25bp in the 15 August policy announcement,” it adds. The shop expects Banxico July 30 to raise its inflation forecast for Q4 by as much as 75bp, from 4.25%-4.75%, leading to pressure to continue to increase the overnight rate. “The central bank is not about to embark on a prolonged tightening cycle; instead, we see it choosing the timing of its rate hikes selectively,” says Credit Suisse. Thus Banxico would look to avoid signaling a long tightening cycle by sitting out an announcement.
Category: Bonds
CAF Approves Venezuela Hydro Resources Loan
CAF has approved a $75m loan to state owned Venezuelan hydrological company Sistema Hidraulico Yacambu-Quibor, the Venezuelan state owned news agency ABI says. The funds will be used to improve the distribution of water from the Yacambu River for agricultural and human consumption in the state of Lara in Western Venezuela, the agency adds.
Costa Rica’s ICE Clinches A/B Funds
The Instituto Costarricense de Electricidad (ICE) has raised $391m through an IDB A/B facility, say bankers on the deal. The multilateral lent the utility $181m in a 15-year credit at an undisclosed rate, marking a new benchmark for the country’s loan market, says a participant on the deal. A $210m 10-year B loan, led by Citi, offers Libor plus 300bp. The funds constitute an unsecured corporate loan, though ICE is owned by the Costa Rican government, which is rated BB+ by S&P. MLAs in the deal include Banco General, BNP Paribas, KFW Idex and Sumitomo Mitsui. The loan was heard oversubscribed.
Continued Rate Hikes Seen in Peru
Looking ahead, Peru’s central bank still has room for more monetary tightening, says Alfredo Coutino, senior economist at Moody’s. Last week, it raised the benchmark rate to 6.00% from 5.75%, and will likely continue on this path to avoid a deterioration in inflation expectations. “It should not be a surprise to see one or two more hikes in the reminder of the year,” says Coutino. The economist says the central bank acted appropriately last week. “The central bank’s monetary action is justified, particularly because monetary conditions continue to be expansionary, with the interest rate still staying below neutrality.” Inflation has picked up in Peru, reaching 5.7% in June, nearly tripling its mid-point target of 2%.
CAF Approves $1bn in Loans for LatAm Countries
CAF has approved a total of $1bn in loans to Brazil, Bolivia, Ecuador and Uruguay. The Caracas-based multilateral approved a $400m credit line for the Uruguayan ministry of finance to support its public debt management strategy. Ecuador received a $310m loan for relief efforts for natural disasters and to finance the Quito road network, says CAF. For Bolivia, the multilateral approved $250m for an economic infrastructure program in marginalized areas administered by the country’s ministry of planning and development. And for Brazil, CAF approved $100m for a road pavement program aimed at improving road connectivity lead by the road infrastructure department of the state of Paraiba, notes the multilateral.
Bladex Hires Merrill’s Vera
Panama-based development bank Bladex asset management unit has hired Tulio Vera, Merrill Lynch’s former head of EM research who left the firm earlier this year, apparently on his own accord. Vera will be chief strategist and head of client relations for the development bank’s asset management business, it said Thursday. The executive will be based in New York and be responsible for identifying investment opportunities and expanding Bladex’s reach to third-party investors. He will report to Manuel Mejia, head of Bladex Asset management. Vera, a native of Chile and a heavyweight in EM research, is heard to have sought new opportunities within Merrill before leaving the firm. His departure coincided with the rise of Felipe Illanes and Pablo Goldberg to new roles within EM research and strategy.
CAF Issues Swiss Bonds
CAF has tapped the Swiss franc market, raising CHF200m ($194m) in 2013 bonds at 100.065 with a 5.00% coupon to yield 4.985%. The offer was upsized from CHF100m on demand of just over CHF200m, say executives on the deal. More than 20 institutional and private investors participated, they add. “It’s a high-quality market that we’ve been looking at for a while,” Gabriel Felpeto, CAF’s international director, tells LatinFinance. He explains CAF’s most recent presentations in Switzerland were important in getting the deal done during a rough week for LatAm bonds. The A+ transaction makes CAF the first LatAm issuer in Switzerland in three years and the second in ten, says Felpeto. He says this issue is part of the $500m equivalent it plans to complete in different markets and currencies by the end of the year. Credit Suisse managed the sale.
Peru LNG Closes Project B Loan
Peru LNG has received the funds from the syndication of a $400m IDB syndicated B loan and lenders are now heard redistributing their portions of the facility to secondary lenders. Pricing in the 3-year pre-construction period is heard to have been bumped up to 100bp from 75bp. In years 4-5, the first two years of the construction period, pricing remains at 100bp, stepping up to 120bp in years 6-10 and 150bp in years 11-15, says a banker close to the process. Up front fees for $50m tickets are heard at 60bp, while $40m tickets will receive 50bp. For $30m ticket, fees are 40bp, says a banker involved. SocGen and BBVA led the financing with a handful of MLAs, including ING, Mizuho and Sumitomo Mitsui, supporting the deal. Peru LNG also obtained a $300m IFC A loan, a $400m IDB A loan and a $150m direct loan from the Export Import Bank of Korea.
Eletrobras Brings Long-Dated Financing
Brazilian power utility holding company Eletrobras will today launch syndication for a $450m B-loan, part of a $600m CAF A/B financing. Proceeds to the state-owned BBB minus credit are destined for capital expenditures. The 7-year B-loan carries a margin of Libor plus 150bp and amortizes in years 4-7. CAF, meanwhile, is lending Eletrobras $150m in 12-year funds — a significant tenor for a Brazilian borrower. The deal, joint led by Citi, BNP and SocGen, is being launched amid much fanfare despite the long tenor, and is heard already counting on MLA support from Natixis, ING, BBVA, Santander and Sumitomo, says a banker close to the process. “Going forward we will be doing a lot more lending in Brazil and Argentina,” a CAF official tells LatinFinance, referring recent commitments of $500m from each country to the development bank, to be disbursed over the next five years. Today’s deal marks the third time Eletrobras has tapped CAF for funds, the first loan having taken place in 2003, says the official. A second bank meeting in Sao Paulo is scheduled for Wednesday.
Cabei Approves Food Program
Cabei has established a $300m program to help offset a food crisis in Central America. The mechanism seeks to increase local production of food staples to cut the dependence on imported goods, the bank says. The program provides for a $50m line of credit to be distributed equally among the bank’s members, plus $40m for each country to establish a trust to help boost food production. The program also allocates $10m for a public-partner partnership in each country for infrastructure project. The bank has 5 member countries: Guatemala, El Salvador, Costa Rica, Honduras and Nicaragua.