Colombia leads DCM supply charge
Along with BNDES and Pemex, the Colombian sovereign issued in the debt market following Wednesday’s supportive tone from the US Fed
LatAm issuers are set to take advantage of Wednesday’s
decision by the US Fed to wait on tapering its stimulus measures – a move that sent
the markets up and excited bond issuers who
had been awaiting the decision.
Colombia issued Thursday a new benchmark bond,
its first since a $1.6 billion sale in January. Brazilian development bank BNDES also joined in with a $2.5 billion deal including three and 10-year tranches. Both upsized from initial expectations.
Pemex sold a global
depository note transaction of 10 billion pesos ($818 million), and raised $750 million under a guarantee program from the US Export-Import Bank
In a move that wrong-footed many analysts, the Fed
Wednesday 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
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.
US growth numbers
were not strong enough for the Fed to begin unwinding the stimulus. And now, many
don’t see the developed markets able to exit stimulus for some time.
Central banks, including the US Federal Reserve, will be
hard pressed to tighten policy in the near term, Pimco CEO Mohamed El Erian told LatinFinance.
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
“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
Elsewhere in the DCM, Pemex contractor Oceanografia has been meeting
investors ahead of a possible cross-border deal. Arcos
Dorados is another with plans to issue, 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 $400 million. Its shares were up Wednesday along with the Mexican and
Brazilian indexes. Other issuers may take this cue to formally launch planned
deals, including follow-ons from airlines Avianca-Taca and Latam. LF