NEW YORK, Feb 24 (IFR) - Latin American credits extended gains on Tuesday after Federal Reserve Chief Janet Yellen said the US central bank will consider rate hikes on a “meeting by meeting” basis.
Several market participants interpreted the subtle change in language as an indication that an interest rate increase will come later than expected, triggering a broad-based rally across developed and emerging markets.
“The rally intensified (after Yellen’s testimony) as people are pushing back expectations of a hike to the late summer or the early fall, which is constructive for risky assets,” said a corporate bond trader in New York.
Among Latin American bonds, names trading on a spread basis were outperforming, seen tightening by as much as 7bp, while higher-yielding credits that trade on a cash basis were simply tracking US Treasuries higher.
Bonds issued by Brazilian state-owned oil company Petrobras held up to their intra-day tights. The company’s 2021s, among the most traded securities of the day, closed at a spread of 577bp-567bp, or 7bp tighter.
After releasing better-than-expected earnings, Mexican corporates such as Grupo Alfa and Grupo Cementos de Chihuahua (GCC) saw their bonds jump three quarters of a point.
Alfa’s 5.25% 2024s, for example, ended the day quoted at 105.75-106.75, while GCC’s 8.125% 2020s were spotted at 107.75-108-75.
“Alfa’s losses on its stake in Pacific Rubiales and the peso depreciation were well offset by strength in (its) Nemak and Sigma (divisions),” said the trader.
Among sovereigns, Colombia and Panama were among the few names to experience some weakness, as expectations of new debt issuance caused some accounts to take profits.
Barclays analysts said in a note on Tuesday they expect Colombia to issue at least US$2bn of debt before the end of the year as slower economic growth will translate into lower revenues for the government.
Both countries have already filed shelves with the SEC to issue.
Mexican telco America Movil is meeting investors in Europe and the US this week as it seeks to market a global peso trade through BBVA, Citigroup, Credit Suisse, Deutsche Bank, HSBC and Morgan Stanley. Meetings will wrap up on February 27.
Mexican media company TV Azteca is bringing to market a rare project bond related to the development of the Andean country’s fiber optic network.
Costa Rica has chosen Deutsche Bank and HSBC as lead managers on an up to US$1bn international bond sale that could take place as early as this month.
Panama filed with the SEC to sell up to US$3.04bn in debt, raising expectations that the sovereign could soon come to the international bond market. (Reporting by Davide Scigliuzzo; editing by Shankar Ramakrishnan)