Global turmoil rattles LatAm debt plans

Global turmoil rattles LatAm debt plans

Brazil Caribbean China Bonds

Hopes of new bond sales from Latin American borrowers fell on Monday as investors dumped debt from the region in the secondary market.

     
     
   Source: Ines Hegedus-Garcia  
The sell-off came amid a global market rout, and as a series of LatAm companies talked to investors about issuing new bonds. Brazil’s Cosan finished a roadshow last week, while the Caribbean’s Cable & Wireless and Sagicor Financial Corporation are on the road this week.

Deals looked increasingly difficult as bond yields gapped out on Monday. Cash prices on 10-yield sovereign bonds from Brazil, Peru and Panama were seen trading around 25bp wider than last week’s levels. That came as yields on US Treasuries fell to 2.23%, their lowest level in almost three weeks, signaling a flight to safety.

“Everything is bad. It started with the China number overnight,” said a debt capital markets source, referring to an 8% drop in the Shanghai stock index on Monday. Companies connected to the Lava Jato corruption scandal were trading wider by 25bp to 100bp on Monday, he added: “It’s nothing new, but now people are just saying ‘get me out’.”

“The Brazil story is just dragging all the Brazilian credits lower,” said a London-based bond banker, adding that a lack of liquidity will likely deter any borrower from issuing in the market in the coming weeks. LF