According to Santander Investment Securities analysts led by Aaron Holsberg, a correction in prices of Latin American corporate debt is “inevitable,” although the market is grinding “tighter and tighter” and has more upside room in the short term. In a client note on Wednesday, Holsberg said bond markets are shrugging off several concerns such as the recent crises in the Middle East and Ukraine as well as potential problems in China, “any of which could be a selloff trigger if market sentiment turned markedly negative”.
The region recorded $67 billion in new corporate debt offerings for the first half of this year, a record level for the period, with 12 percent of deals going mostly to buybacks.
Holsberg is recommending investors to go “overweight” on bonds of Brazilian mining giant Vale SA due in 2022 amid recent gains in prices of Chilean and Peruvian investment grade-rated corporate bonds. In addition, the analysts recommend steelmaker Gerdau SA’s bonds due in 2024, whose yields are about 0.30 percentage points off the company’s yield curve. (Editing by Peter Galloway)