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Sovereign debt: Next in line?

Mar 1, 2013

Bolivia and Paraguay have shown the bond market is open for riskier credits at exceptionally low rates. An Ecuadorian benchmark may push the limits of incredulity – but might not be so farfetched

By Ben Miller and Mariana Santibáñez The much talked about search for yield has sent Latin American borrowing in unprecedented directions, pushing investors into sovereign credits that would have been unthinkable even two years ago. They are not even finding much yield in these places. Bolivia paid 4.875% to borrow 10-year money in October and Paraguay debuted in January paying 4.625% for the same tenor. Such precedents have prompted the question: which sovereign might be next from a group for whom external debt issuance would have seemed improbable not so long ago? The lower-rated Central American and Caribbean issuers enjoy decent access. Guatemala achieved a 5% yield on a 15-year bond in February. A return from Costa Rica is expected in April or May. A Honduras debut has been considered in the past, and as far as new credits, perhaps only Cuba is off the table. But the name that...

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“The crisis has been a setback for reserve diversification."

Jan Dehn, Ashmore Investment Management