January 18, 2017 / 5:01 PM / a year ago

UPDATE 2-LatAm nations jump to bond market ahead of Trump

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By Paul Kilby

NEW YORK, Jan 18 (IFR) - Three Latin American nations led the charge into the US bond market on Wednesday, selling over US$5bn of new debt as the clock counts down to the inauguration of Donald Trump as US president.

Just a day after Trump’s comments sent the US greenback into retreat, underscoring fears of increased volatility ahead, Chile, Colombia and the Dominican Republic all launched bond deals.

Argentina was following closely behind with its own multi-billion dollar trade, already flagging its terms ahead of expected pricing on Thursday.

“It seems like Friday is the line in the sand you have to get ahead of,” one syndicate banker told IFR.

“Argentina probably felt there is so much supply out there that they want to get some shelf space and make sure investors saved some cash (for them).”

Some of the president-elect’s rhetoric has set off jitters across the region, and some market participants noted that this was the last chance to act before Trump takes power.

“There is not a lot of clarity after Friday and the rates environment is constructive for dollar trades, especially sovereigns,” another banker said.

Trump on Tuesday said the US dollar was “too strong”, a comment that reversed some of the gains the greenback had made since his November election victory.

Colombia and the Dominican Republic sold a combined US$3.7bn of US dollar bonds, while Chile launched a Ps1trn (US$1.52bn) Euroclearable peso-denominated trade.

The state-owned company that manages the metro system in the Chilean capital of Santiago, Empresa de Transporte de Pasajeros Metro SA, also priced a US$500m 30-year bond at US Treasuries plus 215bp.

Brazilian aerospace company Embraer and Central America Bottling Corporation also announced roadshows on Wednesday as they readied new bond offerings as well.

“There is a lot of downside to this market,” said a third banker. “So if you are smart, you want to get ahead of the curve rather than gang around. That is really the driver.”

The deals were expected to see good demand, even in one of the busiest sessions of emerging market sovereign debt in recent years.

Aside from the four LatAm countries that announced deals on Wednesday, Turkey and the Philippines are also approaching investors with dollar trades.

“This has got to be a record day (for sovereigns),” said Sean Newman, a senior portfolio manager at Invesco.

Investors have money to put to work after a long issuance drought. Inflows have also been relatively benign, despite expectations of heavy redemptions after Trump’s win.

“There is demand out there, cash levels have been building up in anticipation of deals coming to market, and fund flows remain supportive,” Newman said.

The largest issue is likely to come from Argentina, which announced five and 10-year tranches for its first international bond sale of the year, expected to price as soon as Thursday.

By mid afternoon, Argentina had already garnered some US$14bn in demand, even before participation from larger accounts focused on other sovereign deals Wednesday.

Order books on Colombia’s two-part US dollar bond sale meanwhile hit a healthy US$9bn, allowing leads to tighten 25bp across both tranches.

The passage of recent fiscal reforms and the peace accord with FARC rebels have made Colombia attractive to investors previously concerned about its ratings trajectory.

“Colombia is in a good position in terms of fundamentals and the peace agreement,” said Eddy Sternberg, EM portfolio manager at Loomis Sayles & Company. “It is not a bad place to be.” (Reporting by the IFR team; Writing by Marc Carnegie; Editing by Natalie Harrison and Paul Kilby)

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