Issuers relieved as stimulus continues
The LatAm bond pipeline is expected to be active following US officials decision to wait on ending QE
LatAm borrowers breathed a sigh of relief Wednesday
following a decision by the US Federal Reserve to postpone a winding down of
its asset purchases, with several readying deals to raise funds before stimulus
measures are unwound.
In a move that wrong-footed many analysts, the Fed
refrained from reducing the $85 billion pace of monthly bond buying, noting that
it needs to see more signs of lasting improvement in the US economy.
The US dollar and bond yields dropped, while Latin
markets soared on the news. Stock indices and currencies jumped across the
region, where asset prices have suffered since May when the Fed first hinted at
ending QE earlier.
The Mexican Bolsa was up 1.86% Wednesday and the Bovespa
gained 2.64%. Meanwhile the Brazilian real tightened to 2.19 per dollar and the
peso to 12.67.
Analysts expect emerging markets will be buoyed by
the news at least until next month’s Federal Open Markets Committee meeting,
when the central bank will again consider tapering its bond buying program.
“We find that the market gives a low probability to
a QE3 adjustment at the October 29-30 meeting,” Monex says in a
note. “However, if the employment and inflation data show a significant
improvement, the expectations for a change by the December 17-18 meeting,
could begin to increase.”
“We now expect tapering to begin in December with a $15 billion
reduction in asset purchases, with a decrease of $10 billion in Treasury
purchases and $5 billion in MBS purchases, and expect the FOMC to finish the
asset purchase program in June 2014, three months later than we previously
envisioned, Barclays says. The shop expects a US rate hike in June 2015.
Markets meanwhile geared up for an almost immediate surge
in activity among the region’s issuers. Most notably, Pemex awaited for the
green light for a global
depository note transaction of up to 15 billion pesos, as soon
Pemex contractor Oceanografia has
been meeting investors ahead of a possible cross-border deal. Arcos
Dorados is another with plans to issue, in order to fund a liability
management exercise it launched last week. Several others who put off
deals in July and August, such as the City of Lima and Telefónica Móviles
Chile, could also be tempted back.
Mexico’s Volaris made sure to price its IPO Tuesday before
the FOMC meeting, raising nearly $400m. Its shares were up Wednesday along with
the Mexican and Brazilian indexes. Other issuers may take this cue to formally launch
planned deals, includingfolow-ons from airlines Avianca-Taca