Friday's non-farm payroll data will be watched carefully,
bankers and investors say, as the issuance pipeline builds amid
a choppy outlook for Latin debt and equity markets.
Mexican equity deals were battered by churning markets last
week, although bond issues managed to proceed and more are in
the pipeline. Two sovereign borrowers, Costa Rica and Suriname,
have been speaking with international investors recently, while
Genomma Lab is preparing to sell a local
currency bond this week.
Nevertheless, Latin America's financial markets will
continue to see volatility, gappy price action and thin
liquidity, keeping most primary debt issuance sidelined until
markets have more clarity, especially on US treasury yields,
Accelerating outflows from EM debt and equity
funds have underpinned tumultuous issuing conditions.
Outflows from EM bond funds reached $5.57bn in the week to June
24, more than double the $2.64bn of outflows the previous week,
according to EPFR. EM equity funds lost $5.62bn in outflows,
although the exit from LatAm equity funds slowed somewhat, to
$149m from $493m the previous week.
Comments from US Federal Reserve head Ben Bernanke on June
19 outlining a timetable to exit its $85m monthly QE program
drove yields wider and exacerbated the EM exodus. US Treasuries
hit a year to date high of 2.6% on June 25, although they have
since retreated to trade at 2.5% on Monday. Bankers expect a
pickup in the US high-grade bond market before primary issuance
takes off in emerging markets.
Bankers and investors remain hopeful for a swift recovery.
"The sell-off doesn't have to do with a shift in underlying
growth or inflation fundamentals, and hopefully we will get a
period of stability which will calm investors and change the
more negative dynamic seen over last couple of weeks," says a
senior EM portfolio manager.
ICA waits on OMA
Volatility impacted Mexico's equity markets last week,
prompting construction firm E
mpresas ICA to shelve a secondary offering of Grupo
Aeroportuario del Centro Norte (OMA) shares.
Corporacion Inmobiliaria Vesta's follow-on equity sale came
in MXP2.49bn ($189m) less than planned after one secondary
seller opted out.
Banco de Chile, however, managed to sell its third Swiss
franc bond, raising CHF125m ($133m) despite fears over mounting
volatility. Four Mexican borrowers also jumped through a narrow
issuance window last week, though some adjusted their
transactions to fit the conditions. LF