Four Mexican borrowers hurried out bond deals Wednesday, grabbing an opportunity to raise cash amid a respite from recent market turmoil which analysts warned was far from over.
Mexican state owned utility Comisión Federal de Electricidad (CFE) was forced to ditch plans to issue long dated debt and opted instead for a shorter tenor and a floating rate structure. The company nevertheless managed to get close to the 15 billion pesos ($1.2 billion) maximum it was authorized to borrow, selling a 12 billion peso note. It had planned a dual tranche five-year floating rate tranche and a 10-year fixed rate one.
Financial and retail firm Grupo Elektra also opted for floating rate format, raising a big deal at the wide end of the price range it had announced. The company printed a 3.5 billion peso bond, which was around 20% oversubscribed.
Road operator Red de Autopistas de Nuevo León jumped into the market Wednesday with little advanced notice upon seeing favorable borrowing conditions. The borrower re-opened a 2047 UDI-denominated toll road securitization Wednesday, adding 1.9 billion pesos to the bond.
Scotiabank rounded out the quadruplet of Mexican borrowers tapping the market Wednesday, making its first foray into a 10 year tenor.
The deals came as markets pulled back slightly from a vicious downward run. Yields on US Treasury bonds tightened five basis points Wednesday, closing a 2.55%, having widened 50 basis points from June 5. Similarly, the Mexican stock exchange closed up 2.38% Wednesday. The improvements continued Thursday, with the market up a further 1.91% late morning local time and US Treasury yields down to 2.49%.
Nevertheless, calmer markets are unlikely to be the end of “the great global emerging markets correction” but may herald a new phase of slower deterioration, according to Société Générale,.
“Looking at the recent history of the US Treasury correction, we estimate that a number of EM rates markets potentially have much more room to sell off. This also seems to be confirmed by the observation that the outflows out of EM have been relatively small by historical standards. In other words, the deflating of the EM bubble remains fairly gradual,” the bank said Thursday in a research note. LF