COVER STORY: Local Currency Fixed Income Goes Global
Demand for local currency fixed income is back, tracking
appreciating LatAm currencies and flaring rates differentials. Structural shifts support the trend, but can it last?
A 2010 surge in LatAm debt issuance denominated in
reais and pesos marks more than continuation
of a decade-long push by borrowers to match assets and
liabilities. More than ever, investors demand securities
denominated in domestic currency, not just for yield, but as
part of a widespread rotation out of stagnant G3 markets.
Last year saw an
increasing flow of global bonds from governments, banks and
corporates denominated in their home currencies. This
included a debut from Chile and some surprising foreign names
in the format, including Anheuser-Busch InBev and Morgan
Stanley in both reais and soles. Sub-Libor
pricing on a Colombia sovereign global TES issue highlights the
draw for issuers, as well as surging appetite from investors
for LatAm FX exposure.
"One of the fastest growing themes now is local currency,"
says Ousmène Mandeng, head of public sector investment
advisory at Ashmore, which manages $41.6...
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