Sales of bonds are likely to be strong in January, market sources told LatinFinance during a market lull in December. The US Federal Reserve’s lift in interest rates that month, for the first time since 2006, helped investors, issuers and intermediaries gauge the direction of dollar borrowing costs ahead.

DCM sources expect bond issuance volumes to be similar this year to 2015 — which was significantly lower compared to recent years. Primary bond volumes dropped to about $74.8 billion in 2015, from $123.4 billion in 2014 and $117.98 billion in 2013, according to data from Dealogic.

In the pipeline, Chile might come to market after a roadshow in the US and Europe in mid-December. Pemex’s Rodolfo Campos says that the Mexican oil company will look to tap the dollar market in the beginning of the year, although it won’t be as big as the Baa1/BBB+/BBB+ rated issuer’s $6 billion jumbo deal in the first quarter of 2015. The company will then seek a bond in euros and another in a “non-traditional” currency, Campos says, as liquidity in the local market will likely not increase with Pemex’s funding needs.

Pemex could also re-tap its recent issue in Swiss francs, Campos adds. The company issued a 1.5% CHF500 million (then $591 million) 2020 bond in November. Pemex hired Barclays and HSBC to arrange investor meetings in the UK in December.

Also from Mexico, grocer Soriana is heard to be looking for a dollar bond in the beginning of 2016.

Issuers from Argentina are expected to tap the market as they look to raise capital amid a new economic environment under Mauricio Macri’s presidency. The new administration swiftly lifted capital controls, reverting to a “dirty float” of the exchange rate, and initiated talks with holdout creditors — a first step to the sovereign’s return to international capital markets. 

Shortly after Macri won the presidential election in November, Banco Hipotecario issued a 9.75% $200 million 2020 note and oil company YPF added $100 million to its 8.875% 2018 notes. Argentine Arcos Dorados, the world’s largest McDonald’s franchisee, finished investor meetings in Switzerland. Energy company Medanito, meanwhile, pushed back a planned $150 million RegS bond sale to January. 

The last two months of 2015 were quiet for bond issuances in the rest of the region. Many companies are trimming investment plans amid lower economic growth forecasts, reducing their appetite for borrowing altogether. 

Some did, however. Development bank CAF tapped the euro market in November, issuing a 1% €750 million 2020 bond. Shortly after, Fibra Terrafina, a Mexican real estate investment trust, debuted with a 5.25% $425 million 2022 note. Terrafina had discussed the deal with investors in early September, but waited for the best moment to issue. Later in the month, Tanner Servicios Financieros postponed a $300 million 2020 bond sale because of adverse conditions. 

Grupo Televisa printed a $1.2 billion bond, the biggest from LatAm in November and December. Fibra Uno, Mexico’s largest REIT, downsized a 5.25% 2026 issue to $500 million. A DCM source following the deal said at the time of issue that Brazil was bringing down investor sentiment for the whole LatAm region. 

On the same day as the US Fed rate decision, Fitch downgraded Brazil to BB+, junk status. The spreads on the Baa3/BB+/BB+ sovereign’s 2025 RegS notes widened by 30 to 40 basis points on the decision. Fitch cited the country’s weakening economy, the implications of the Lava Jato corruption scandal and the possible impeachment of President Dilma Rousseff.

The downgrade, which had knock-on effects for many corporates, capped a dark year for Brazil’s economy and political institutions. Brazilian budget airline Gol was sitting on the sidelines for a possible cross-border deal at year-end, which DCM sources say will likely be an enhanced equipment trust certificate (EETC). LF