NEW YORK, March 27 (IFR) - Latin American credit markets were drifting tighter Friday morning after a week of renewed inflows into the asset class and continued buyer interest in the region.
“It is a slow start but the tone is decent,” said a New York based trader. “We are bid and we are not lower.”
Sovereigns proved to be the outperformers this week with recently tapped deals from Colombia and Peru soaring in the secondary markets despite the backup in US rates Thursday.
Today the yield on the 10-year US Treasury was hovering just below 2% after the market expressed disappointment that fourth quarter GDP numbers were not revised higher.
“As long as the 2% line in the sand holds (for the 10-year US Treasury), I would expect (demand for LatAm sovereigns) to continue,” said a second trader.
Colombia’s 5% 2045 was trading at around 102.125 mid market Thursday, marking a good two point jump since it was reopened at 99.366 earlier this year. It was a similar story for Peru’s 2050s, which were being spotted at a mid-market price of around 121 versus a retap price of 115.378.
Traders are reporting strong demand from European accounts increasingly favoring the higher yields in EM, while US real money investors are also showing interest in LatAm amid a growing perception that US rate hikes will be pushed off until at least much later in the year.
“US real money waited too long, so they are chasing the market higher and tighter,” said the second trader.
The better tone was underscored by a reversal of outflows for EM bonds funds, which enjoyed US$20.85m of inflows during the week ending March 25, according to UniCredit citing EPFR data.
Local currency funds continue to suffer from redemptions with US$384.42m heading for the exits during that period, but hard currency and blended funds took in a combined US$484.4m.
The Brazilian sovereign is also enjoying a bounce in prices today with the 2025 climbing about 3/8s of a point to 97.35 despite expectations that the economy is likely to slide into a recession this year.
The release of GDP figures today showed that the economy grew at a better-than-expected 0.1% last year, though that marked the country’s worst performance since 2009, according to Reuters. The Brazil Real is also taking back gains as it hits 3.21 against the dollar this morning, coming off 3.13 low seen earlier this week.
Meanwhile, in the corporate space, the new non-call five perp hybrid issued by Colombian telco ColTel was bouncing off lows to hit 100.05-100.35 as flippers are slowly flushed out. The bond was priced at par but fell to as low as 99.125 on the break as retail investors looked to lock in quick gains.
Mexican media company TV Azteca is looking to pull the trigger on a rare project bond related to the development of Peru’s fiber optic network as soon as Tuesday.
The senior secured notes will be backed by project cash flows and will be issued by special purpose vehicle Red Dorsal Finance Limited.
Final maturity will now fall in 2031, as opposed to the 2032 originally stated in the preliminary prospectus, while average life will be around 9.5 years. BESI - Grupo Novo Banco and Credit Suisse are the bookrunners on the deal. (Reporting By Paul Kilby)