Chilean companies and banks have rushed into the bond market in recent weeks, turning the tables on a quiet second quarter for debt issuance and snatching a chance to lock in cheaper interest rates.
Base rates for paper denominated in UF, Chile’s inflation-linked currency, reached 96 basis points on August 21 for five-year tenors, according to the central bank. That was some 15 basis points tighter than the 2014’s tight, and 31 basis points tighter than their recent peak on June 15, according to LarrainVial’s market indicators.
Coupled with a surge in investor liquidity, corporate issuers are taking advantage to price paper at favorable rates.
Movistar Chile, rated AA/AA+ locally, issued a UF2m ($72m) 2020 bond at 96 basis points over the benchmark on Thursday, a better pricing than some AAA rated banks have achieved, a banker told LatinFinance.
The banking system has also tapped into the opportunity. BCI and Itau have benefited from good rates, while Santander tops the charts, selling five bonds within the last month. Other financial institutions, including insurer Banmedica, lenders Banco Ripley and Banco Falabella, and financial services firm Forum have also issued debt recently.
Despite the recent spree, activity in capital markets in 2015 still lags behind figures for the same period last year.
“Debt capital market activity has been poor, with smaller bonds and scarce corporate presence, but better than equity capital markets, which have been dry,” said one Chilean banker. “The M&A front has been by far more interesting.” LF