As expected, Chile has tightened its monetary policy rate by 25bp to 2.75%, slowing from the 50bp hike seen in the past 4 months. The central bank says in a statement that the domestic market has seen robust growth in line with expectations. Bank of America Merrill Lynch says in a research report that the reduction in the pace of hikes is also brought by the appreciation of the CLP, which it forecasts will strengthen to CLP500 per USD by the end of 2011 from the CLP530/USD level it expects to see in December 2010. Local shop Celfin forecasts that the rate will increase to 3.25% by the end of 2010.
Category: Economy & Policy
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Fitch Boosts Colombia Outlook
Fitch says it has improved the outlook on Colombia’s BB+ rating to positive from stable to reflect the country’s economic resilience and improved macroeconomic performance in relation to its peers. In spite of comparatively slow recovery by regional standards, Fitch says Colombia’s 5-year average growth, reaching 4.4% in 2009 and 4.3% in 2010, is expected to outperform the BB median of 3.5% and 3.1%, respectively. The outlook puts Colombia on track for investment grade early in 2011.
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Mexico Expected to Hold Rate Steady
Mexico’s central bank is expected to leave its monetary policy rate unchanged at 4.50% today. Morgan Stanley, which agrees with market consensus, says in a research report that unlike other countries in the region that are fighting currency appreciation, Mexico’s currency is not misaligned and inflation trends have been benign. Bank of America Merrill Lynch also expects rates to remain the same and says any intervention to control the currency is unlikely.
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State of Mexico Bags MXP610m Loan
The State of Mexico is arranging a 19.9 year MXP610m enhanced loan from Banorte, which will pay a spread of 125bp over TIIE, which closed at 4.8450 yesterday. Moody’s has assigned a Baa3/Aa2.mx rating. The loan is payable through a trust, to which the state has pledged the flows and rights to 100% of its federal participation revenues and to 25% of its revenues from the Fondo de Apoyo para el Fortalecimiento de las Entidades Federativas. The rating reflects the underlying creditworthiness of the State of Mexico, which has a Baa2/A2.mx rating, as well as the features of the loan. These include a strong trust structure, estimates that cash flows generated will provide strong debt service coverage ratios, a moderate level of reserves and strong historical cash flows. The last rating action Moody’s took with respect to the State of Mexico was on August 27 2010, when Moody’s assigned ratings of Baa3/ Aa2.mx to its MXP2bn Municipal Lending Program.
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Chile Expected to Tighten Rate
Morgan Stanley says in a research report that after 4 consecutive months of 50bp rate hikes, the central bank is likely to slow the pace of tightening to 25bp, tightening to 2.75%, a possibility it considered before during the September 16 meeting. The main driver behind the lower increase is the rally in the real exchange rate, which represents a disinflationary factor while there is still very low inflation, Morgan Stanley adds. Local bank Celfin also believes the central bank will opt for 25bp over 50bp. It forecasts that the rate will reach 3.25% by year-end.
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Inbursa Hits Bond Target
Inbursa has sold MXP5bn in 3-year bonds on an orderbook that was 1.7x oversubscribed, according to a banker at one of the leads. The bonds pay a spread of TIIE plus 20bp, in line with guidance. Bank treasuries and mutual funds were the main buyers, with some participation also coming from private banks. Use of proceeds is to maintain the bank’s liquidity profile, says the banker. The transaction was through Inbursa and BBVA Bancomer and is rated AAA on a national scale. The deal follows on from the bank’s August bond issue, its first since it was set up in 1993. The bank issued MXP5bn in 5-year paper at TIIE plus 24bp.
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Scotia Sinks, Compartamos Swims
Scotiabank Tuesday raised MXP2.67bn in Mexico, short of the MXP3.5bn it was aiming to issue and wide to expectations. The bank issued a $2.312bn 5-year at TIIE plus 40bp and a MXP358m 7-year at TIIE plus 49bp. Price talk for the AAA rated bonds had been in the 35bp area for both tranches according to an investor. Another investor adds that several banks have already issued this year, and so the buyside has sufficient AAA rated and bank paper. The bonds were issued to refinance MXP2bn that was due in September, MXP700m maturing in November and MXP800m due in December, according to investors. Meanwhile, Banco Compartamos was oversubscribed, as investors considered the spread and the AA rating attractive. The microfinancing bank that lends only to women issued a 2015 bond at 130bp, with the book 1.6x oversubscribed and closed in under an hour, according to a banker at sole lead BBVA Bancomer. Guidance had been 125bp-135bp, refined from an earlier 130bp-140bp over TIIE. The bonds are 50% amortizing in the 4th year and 50% amortizing in the 5th year. Compartamos was sold to banks, private banks and asset managers. It is the longest tenor issued by the bank, with previous bond issues only going up to 3 years, adds the banker. Proceeds will be used to extend its lending portfolio.
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Davivienda Issues Local Bonds
Colombian bank Davivienda issued COP500bn ($208m) in local bonds in 4 series. A COP91.6bn 2-year tranche pays 1.10% over IBR, a COP92.3bn piece pays 1.31% over IBR, a 5-year COP120.2bn pays 3.14% over IPC, and a 7-year COP196.1bn tranche pays 3.63% over IPC. Total demand for the AAA rated notes soared to 3.1x the amount offered, says a banker away from the deal. Davivalores, the bank’s brokerage, managed the sale.
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Peru Surprises With No Change
Contrary to market expectations, Peru’s central bank left its monetary policy rate unchanged at 3.00%, citing a small drop in inflation. Morgan Stanley forecast it would tighten by 25bp to 3.25%, a lower hike than the 50bp increase seen in August and September, due to low inflation, which is around 2.0%. Barclays also expected a 25bp hike, with the rate ending at 3.5% by the end of the year. Bank of America Merrill Lynch expected the bank to continue the trend with a 50bp hike.
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Peru Rate Hike Expected
Peru’s central bank is expected to tighten its monetary policy rate today. Morgan Stanley forecasts it will hike 25bp to 3.25%, less than the 50bp increase seen in August and September, due to low inflation. Barclays also expects a 225bp hike, with the rate ending at 3.5% by the end of the year. Bank of America Merrill Lynch meanwhile predicts a 50bp hike. It expects Peru to end the year at 4.25%.