Latin American borrowers are set to launch bond transactions after Thursday’s US Federal Reserve, LatinFinance understands.
Debt capital markets sources said a rate hike on Thursday would not impede LatAm bond sales. Indeed, many said they hoped the Fed would raise interest rates – just to put an end to uncertainty.
“I don’t think it will do anything,” one source said. “A 25bp rise won’t stop [LatAm] issuers from coming to the market.”
“People just want to see it happen, or get it out of the way as one less data point to worry about,” said another.
Federal Reserve governors are meeting today and tomorrow to decide whether to raise interest rates for the first time since the financial crisis. Chairwoman Janet Yellen has hinted that the Fed could raise rates this month, but recent volatility in Chinese markets and lackluster US economic indicators could push the Fed away from a hike.
“I don’t think the economy is strong enough. If they do it, they are doing it just to be able to say they did it, because there isn’t a need to,” a third DCM source said.
“At the end of the day, [a rate hike] is priced in. I think its implications are going to be felt more at the front end of the US Treasury curve than the long end,” a fourth DCM source added.
Yields on two-year US Treasury notes closed at 0.82% on Tuesday, their first time above 0.8% since March 2011. Meanwhile, yields on the 10-years ended at 2.28%, slightly higher than last week’s average of 2.204%.
LatAm issuers will sell cross-border bonds next week, including a few new names, DCM sources said. Fibra Uno and Fibra Terrafina, Mexican-style real estate investment trusts, finished roadshows last week.
Argentina’s state of Neuquen is on the road through Monday, September 21, ahead of a 144A/Reg S deal. Investors have had appetite for the credit, but demand will depend on how buyers view the country’s October elections, a DCM source said. LF