Ally Credit, the auto financing company, will issue a MXP1bn 1.5 year bond via Ixe and Scotia. Guidance on the deal is TIIE plus 150bp, though a banker on the deal says he expects pricing could tighten, as market conditions are improving. He adds that treasuries, investment funds, private banks and retail banks are expected to participate in the deal. The bonds are rated AAA on a national scale. Proceeds will be used to finance auto loans.
Category: Economy & Policy
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Ecuador Plans Big Infrastructure Spend
Ecuador plans to spend over $1.4bn in new infrastructure projects in 2011, according to the government. Almost half, $742m, will go toward constructing a new network of motorways stretching from the mountains to the Pacific Coast. The country is also spending $523m to fix the Manta Port. Although the government declines to comment on how it plans to fund next year’s projects, market participants say the mayor of Manta has gone on a financing trip to China.
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NR Finance Wide of Guidance
NR Finance has priced wide of guidance on its MXP2.8bn bond issue Wednesday via Banamex and Scotia. The AA+ rated 3-year bonds landed at 65bp over TIIE, wide of 60bp guidance. The Mexican subsidiary of the financing arm of Nissan-Renault received MXP3.5bn in demand and 76 orders, according to bankers leading the deal. Investors include investment funds, private banks and insurance companies. Proceeds will be used for working capital and refinancing. It was also larger, cheaper and for a longer tenor than NR Finance’s last 2 bond issues, in April 2010 and November 2009. NR Finance in April sold MXP2bn in the domestic bond market. The 2012 bullet notes paid a spread of TIIE 95bp. Proceeds were to support NR’s lending capabilities. BBVA Bancomer managed the sale, rated AA+/Aa1 on a national scale.
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Tariffs Hinder India/LatAm Investment
Tariffs between LatAm and India are hindering trade, according to a study by the IDB. India represents only 1% of the region’s overall trade, compared to 10% with China. Reducing tariffs on Indian imports by just 10% would likely increase imports of Indian goods into Chile and Argentina by as much as 36%, the IDB says. India’s average tariff on LatAm agricultural goods is 65%, more than 5 times China’s 12.5% tariff, says the IDB. Even though Latin American tariffs on Indian goods are not as high – reaching 9.8% in the case of manufactured products – they are well above the 4% to 6% OECD range, the study said. A 10% reduction in average tariffs (i.e., reducing a 6% tariff on a good by 0.6%) imposed on Indian products, for example, would likely increase imports of Indian goods by 36% in Chile and Argentina. Cutting transportation costs will also boost trade. A 10% reduction in shipping costs would likely increase trade between Chile and Argentina by 46% and 47%, respectively, according to the IDB. High trade costs are also preventing LatAm from reaping full benefits from its current trade with India and undermining the flow of investments between the 2 regions. Today a 1% growth in China’s gross domestic product generates a 2.4% increase in this region’s exports to China. Meanwhile, a 1% rise in India’s GDP yields just a 1.3% growth in the region’s sales to the country. The study also finds that India could be a significant competitor with LatAm countries. In terms of low-technology goods, India has been boosting exports of textiles and apparel. It has now 3% of the U.S. market for these goods, which is twice that of Brazil’s (1.5%), higher than Central America’s (2.4%), and fast approaching Mexico’s dwindling share (7%).
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Chile Tightens As Expected
As expected, Chile’s central bank tightened its rate by 25bp, bringing it to 3.00%. The bank says the local economy is enjoying robust growth while inflation is lower than expected and the local currency has remained stable. Celfin expects another 25bp increase at December’s meeting, bringing the rate to 3.25% by the end of the year. Morgan Stanley agrees, adding that it expects the rate to end 2011 at 5.50%
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NR Aims For MXP Bond Market
NR Finance, the Mexican subsidiary of the financing arm of Nissan-Renault, is coming to market Wednesday for up to MXP3bn, via Banamex and Scotia. Guidance on the 3-year bonds is 60bp over TIIE, with the bonds rated AA+ on a national scale. Investors are expected to include investment funds, private banks and insurance companies. Proceeds will be used for working capital and refinancing. NR Finance sold MXP2bn in the domestic bond market in April. The 2012 bullet notes paid 95bp over TIIE. Proceeds were to support NR’s lending capabilities. BBVA Bancomer managed the sale, rated AA+/Aa1 on a national scale.
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Chile Seen Hiking Rate
Chile’s central bank is expected to tighten its monetary policy rate by 25bp today to bring it to 3.00%. Morgan Stanley says that the hike will be due to the disinflationary impact of a stronger Chilean peso. Meanwhile, Celfin, which also sees a 25bp hike today, expects another 25bp increase in December’s meeting, bringing the rate to 3.25% by the end of the year.
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Jamaica Slashes Rates
The Bank of Jamaica cut its monetary policy rate by 50bp to 7.50% in response to lower inflation. JPMorgan expects annual inflation to moderate from 13.2% in September to 10.0% by year-end due to still weak domestic demand and a stable Jamaican dollar. It also says double-digit inflation and upside risks stemming from the recent surge in global food prices will limit the central bank’s ability to cut interest rates further. Including Friday’s rate cut, the central bank has cut rates by a total of 300bp since February.
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Honduras Gets Fiscal Reform Loan
Honduras will receive $45.8m from the IDB to support the country’s fiscal reforms, and improve its tax system and state utility revenues. The financing will consist of a $32.06m, 30-year loan with a 5.50-year grace period and a fixed income rate, and a $13.74m, 40-year loan with a 5.50-year grace period and an annual interest rate of 0.25%.The financing will be disbursed in 2 tranches of $22.9m. The first will come after the approval of a tax reform designed to increase collection rates, efficiency and equity in the tax system. The second tranche will come after the approval of other tax regulations. The country will also enact a law against tax evasion. In addition, the government will take steps to raise the revenues of the state-owned electricity company, Enee, and the telecommunications company, Hondutel.
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Peru Leaves Rate Unchanged
Peru’s central bank left its rate unchanged at 3.00%, in line with expectations. The bank says it decided to leave rates on hold as annual inflation in October was negative for the second consecutive month, primarily because of a drop in food prices. Celfin expected the rate to stay on hold, also citing falling consumer prices. Morgan Stanley expects the bank to pause for the remainder of the year. It had previously expected to rate to be tightened to 4.00% by the end of 2010.