Investors and bankers had expected a slower pace of bond sales in the first two weeks of July, as the region’s focus shifted toward the final stages of the Fifa World Cup in Brazil. But credits hit the market in force that month, before taking a break for the northern summer in August.
Latin American sovereigns were especially busy. Jamaica fired the first salvo when it priced an $800 million 10-year soft-bullet bond at 7.625%, taking $4 billion in orders. It was the Caribbean country’s first cross-border bond after a three-year hiatus.
Dominican Republic and Brazil also tapped the dollar market, while Mexico chose to go back to Japan to diversify its investor base, raising 60 billion yen ($590 million) in a triple-tranche transaction that locked in the country’s best-ever financing rates in five, 10 and 20-year maturities. “These are the lowest prices at which we have sold bonds in the past […] for these maturities, in any currency,” the country’s head of public credit, Alejandro Díaz de León, told LatinFinance when the bond was sold in mid-July.
Paraguay sold a $1 billion bond in early August, pricing the paper to yield 6.1% in a deal that was described by the country’s deputy economy minister as a “vote of confidence” from the investment community. “Market conditions are really good for emerging countries like Paraguay that have been implementing coherent economic policies for a while, which has helped us improve our ratings,” Daniel Correa told LatinFinance.
There were also a string of deals from Brazilian corporates, including InterCement, Odebrecht and Tupy. Caixa Econômica Federal broke new ground in July, pricing the first Basel III-compliant tier two bond from Brazil.
Chilean and Peruvian companies also tapped strong interest for Latin American debt, a bid that is amplified by the scarcity value of deals from smaller countries. Chilean power company Transelec sold a 4.25% $375 million 2025 bond, tightening the price by nearly 20 basis points, thanks to a book that reached over $2 billion. Entel’s 4.75% $800 million 2026 bond was dampened by two negative credit actions over the past year.
Peru’s InRetail and Cofide, and Chile’s Colbun, Celulosa Arauco and Codelco also priced deals in the period. The Chilean state-run copper miner, Codelco, debuted in the euro market in July, raising €600 million ($816 million) with a 2.25% 2024 bond that attracted high-grade investors.
In August, Findeter issued the first global-peso bond out of Colombia in more than 18 months, a 7.875% $500 million-equivalent 2024 bond, which drew $1.3 billion in orders. The development bank’s bond sale came close on the heels of Moody’s decision to upgrade Colombia’s sovereign rating in late July.
Minerva was the only non-bank corporate to tap the dollar market in August. The Brazilian food company took $1 billion in orders for a $200 million add-on to its 7.75% $850 million 2023 non-call 2018 bond.
Sources said the drop in activity in August was seasonal, and not indicative of issuers being blocked from the market, while companies issuing in September could benefit from pent-up appetite from investors. The supply came against a backdrop of steadily tightening yields on US Treasury rates. The 10-year benchmark reached a year-long low on August 15, at 2.34%. It hovered within 10 basis points of that for the remainder of the month.
Argentina takes attention
But as the cross-border market took a breather in August, Argentina took to the limelight. The country defaulted on July 30, after it missed a payment to restructured bondholders. The payment had been blocked by a US court ruling that ordered the country to pay around $1.5 billion to holdout creditors before servicing restructured debt. A series of attempts for a solution ensued, including discussions between third parties and the holdouts.
The latest attempt to bypass the ruling involved swapping New York law bonds for local law paper. Analysts said the plan would be hard to carry out. LF