Talk of US rate cut boosts LatAm bonds

Talk of US rate cut boosts LatAm bonds

Bonds Debt Capital Markets Corporate & Sovereign Strategy Debenture Economy & Policy Fixed Income Politics United States Brazil Argentina Mexico

Latin American issuers could set off a flurry of activity in the cross-border bond market in the next few weeks as expectations mount that the US Federal Reserve will cut interest rates in July and prompt investors to seek higher returns in emerging markets, LatinFinance has heard.

"The market is looking pretty strong," said a bonds banker in São Paulo. "Many of the firms that have been on the sidelines might be getting ready to come to the market."

Some analysts expect the Fed to cut rates by 50bp in July and again later in the year, partly to stave off risks from a prolonged US-China trade war. The expectations are a boon for Latin America bond issuers, the banker said.

"Bonds are rallying like crazy," he said. "We have seen some deals, like Banorte, getting very oversubscribed, a sign that investors could put money to work."

Mexican lender Banorte raised $1.1bn from a two-part bond deal last week that was six times oversubscribed. Argentina's YPF also took advantage of market conditions to sell $500m in 10-year notes, returning to the cross-border bond market for the first time since late 2017.

In Brazil, meanwhile, the local bond market is picking up the pace as the lower house of Congress is expected to vote on pension reform before it breaks for recess in mid-July, the banker said.

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