Brazil’s central bank tightened its rate by 50bp as expected, bringing it to 11.75%. “We expect another 100bps in rate tightening through year-end, taking the rate to 12.75% by end-2011,” says Bulltick. Morgan Stanley thinks the rate will end the year at 12.50%.
Category: Economy & Policy
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DomRep Hikes Rate, Replaces FinMin
The Dominican Republic’s central bank tightened its rate by 100bp, bringing it to 6.0%, its highest level since February 2009. The central bank cites headline inflation, which at 6.2% in January is running above the bank’s 5-6% target for this year. “We believe the pace of future rate hikes will likely decline as annual inflation falls within the official target range,” says JPMorgan. Nomura says this is a good policy move to control aggregate demand, which is growing at a fast pace. Meanwhile, the country’s finance minister, Vicente Bengoa, has been replaced with Daniel Toribio, the general manager of state-owned Banco de Reservas and minister of finance for the first term of president Leonel Fernandez. “We view this change positively, as this is likely to result in increased coordination within the economic cabinet and improved policymaking,” says Nomura analyst Boris Segura. “The departing minister of finance had a difficult working relationship inside President Fernandez’s economic team,” Segura says. “Also, Bengoa explicitly rejected approaching the IMF until Fernandez made the decision to engage it in Q3 2009,” he adds. Bengoa had been finance minister since 2004.
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Credit Agricole to Issue in MXP
Credit Agricole will issue up to MXP2bn in 3-year bonds in either the second or third week of March, according to a lead banker. The bonds will pay a spread over TIIE, with the guidance yet to be determined, and are rated AA on a national scale. Banorte and Ixe are joint leads. The use of proceeds is for general corporate purposes including expanding its business in Mexico, adds the banker.
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Interacciones Coming Tight Say Afores
Mexican pension funds say price guidance for Banco Interacciones’ 3-year bonds, of which they will issue up to MXP2bn today, is too tight. Price guidance is in the 100bp over TIIE area. “If you look at the bank’s capital ratios, they are not great, so for that price I would not take on that risk,” says one head of asset manager at a Mexican pension fund. Another asset manager at a pension fund says the spread would have to be double for the price to be attractive enough for it to participate in the bond issuance. The pricing had been expected last week but the issue was delayed in order to include Grupo Interacciones’ 2010 financial results, according to Fernando Perez Saldivar, director of treasury and wholesale banking at Interacciones. The deal is self-led together with HSBC. The proceeds will be used to increase lending, especially for local government infrastructure projects.
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Brazil Expected to Tighten Rate
Brazil’s central bank is expected by the market to hike its rate, known as Selic, by 50bp to 11.75% today. Bulltick agrees with market consensus and expects year-end Selic rate to end at 12.75%. Morgan Stanley also agrees there will be a 50bp hike, but thinks the rate will end the year at 12.50%.
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CFE ABS Retaps for MXP3.8bn
A reopening of a securitization of loans to Mexico’s CFE has raised MXP3.8bn. The 2020 floating-rate amortizing notes paying TIIE plus 45bp are backed by loans made by Banamex to the state-owned utility. The reopening was negotiated to yield TIIE plus 40bp. Bankers say the price represents a reoffer at a slight premium to the 95 cent face value. The face value is lower than 100 because the notes have already had their first amortization. The bonds have an average life of 5 years, and are rated AAA on a national scale. Banamex and Ixe managed the sale, which comes under a MXP24bn shelf. The original deal raised MXP3.25bn in July 2010.
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Herdez Raises MXP600m
Mexico’s Grupo Herdez has sold MXP600m in floating-rate domestic bonds. The 2015 priced at par and will pay TIIE plus 60bp, inside of what a banker on the deal says had been 70bp guidance. The book saw 6x oversubscription, according to the banker. The producer of juices and canned vegetables, best known for its salsa, plans to use proceeds to refinance existing debt and for capex. Banamex led the deal, rated AA on a national scale.
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Herdez Talks Price
Mexico’s Grupo Herdez is planning to issue up to MXP600m in 4-year bonds today, with price talks heard in the 60bp over TIIE area, according to investors. Banamex is leading the deal, which is rated AA on a national scale. The issue had originally been expected on February 4, but the pricing date was moved after the roadshow was extended, says a lead banker. The producer of juices and canned vegetables, best known for its salsa, plans to use proceeds to refinance existing debt and for capex.
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Mexico’s San Luis Potosi Gets Loan
The Mexican state of San Luis Potosi has received an enhanced loan for MXP1.48bn for 18 years, 9 months from Santander. The loan will pay a spread of TIIE plus 90bp, with proceeds being used to refinance a previous loan. The loan is payable through a trust, to which the state has pledged the flows and rights of 22.5% of its federal participation transfers. The loan is rated A1 on a national scale, reflecting the underlying creditworthiness of the state, the strong trust structure, solid debt coverage ratios, and a solid level of reserve funds, according to Moody’s. Under a base case scenario, cashflow would generate 4.8x debt service coverage at the lowest point during the life of the loan, or 3.9x under a stress case. Reserve funds represent a 2.0x debt service coverage over the life of the loan.
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Santander Adds to MXP 3-Yr Supply
Santander Friday priced MXP5bn in 3-year bonds, with a spread of TIIE plus 20bp, according to lead bankers. Investors had expected the bonds to price in the 25bp over TIIE area. The order book received MXP7.5bn in demand, add the leads. The deal was self-led, joint with Banamex. Bank treasuries, investment funds and private banks were the main participants in the deal. The proceeds will be used to expand the bank’s lending portfolio. The bonds are rated AAA on a national scale. The day before, BBVA Bancomer issued MXP5bn in 3-year bonds, in the first bond issue by a bank in the local Mexican market this year. The bonds priced at 20bp over TIIE, the tight end of 20bp-25bp guidance. The book was MXP6.3bn on the AAA rated self-led deal.