LatAm bonds set for September rebound
After a lull in August, Latin American borrowers are expected to return to tapping international debt markets in the coming weeks
Sales of new bonds from Latin America are
expected to rebound in September, while trading levels on US
Treasury bonds will likely determine credit supply after that,
market participants say.
couple of weeks should be very slow," said a DCM banker.
"It’s when most people are on vacation. I think
September may be a little bit busy given that
there’s been somewhat of a sell-off."
||Bovespa Stock Exchange (Rafael Matsunaga)
Bankers attributed a slight dampening in bond prices across
emerging markets in recent weeks to profit-taking after an
extended rally: "But I don’t think that the
deterioration of the situation in Iraq or sabre rattling in
Ukraine are going to significantly alter the global risk
appetite," said one.
"Come September, unless those situations get a lot worse than
they are now, the market will shrug it off." Brazilian bond
sales are likely to be muted in October and November, months in
which the country’s market is expected to be
volatile because of the presidential elections —
something that could be prolonged if the vote goes to a run-off
on October 26.
A slowdown in Brazil will hold back overall market activity in
LatAm, sources said. Many issuers have taken advantage of good
market conditions in recent months to frontload their financing
for 2014, trimming market expectations of supply in the final
weeks of the year.
However, the 10-year US Treasury rate has fallen steadily this
year, reaching at 2.34% on Friday — a 2014 tight. If
US rates remain low and demand for high yield continues to be
strong, companies may be tempted to raise more capital in the
bond market to replace more expensive debt, as Brazilian food
Minerva did last week, bankers say.