Mexico has jacked up its policy rate by 25bp to 8.00% in an attempt to stamp out inflation, building on a 25bp rate hike enacted in June. This was in line with consensus and the post meeting communique is viewed as broadly neutral. The central bank adds that it will revise its inflation projections July 30 by approximately 50bp on average. The yield curve moved up by 12bp-15bp across the board, says Credit Suisse. “We would not expect another rate hike in August, unless inflation expectations worsen materially. For the balance of the year, we expect just one more rate hike of 25bp,” adds the shop. “We continue to expect Banxico to hike the overnight rate a further 25bp, to 8.25%, this quarter,” says Barclays. Others expect a pause. “We expect the central bank to leave the TdF unchanged at 8.00% until June 2009 as there are no demand-pull pressures on inflation and the balance of risk on growth has deteriorated,” says Goldman Sachs. “If, by the end of 1H2009, actual and expected inflation are converging toward 3.5% (i.e. the middle of inflation target upper half band) then we see the possibility that Banxico could initiate a monetary easing cycle involving three cuts of 25bp apiece, pushing the policy rate to 7.25% by end 2009,” it adds.
Category: Bonds
PDVSA to Buy Back Project Debt
Venezuela’s PDVSA has reached a lock-up agreement with bondholders to buy back 77.23% of the $756m in outstanding debt from the Petrozuata heavy oil project. The deal covers Petrozuata’s 7.63% of 2009 series A, 8.22% of 2017 series B, and 8.37% of 2022 series C bonds. In a tender offer to be launched within 90 days, the state oil company will pay a purchase price equal to par plus accrued and unpaid interest, and 33% of the redemption premium specified in the original bond issue, plus a consent fee of 0.25% on the principal amount. PDVSA also said it repaid the project’s $160.7m bank loan at the beginning of the month. Petrozuata was nationalized last year.
CS Sees No Mexico Rate Hike
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.
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.