26 de febrero de 2015 / 15:38 / en 3 años

LatAm credits extend rally as borrowers emerge

NEW YORK, Feb 26 (IFR) - Latin American credit markets were extending gains Thursday morning as investors grew more comfortable about the timing of US interest rate hikes and any immediate risks from Greece.

“We are opening tighter and have a bid for duration and risk now that (Fed Chairwoman Janet) Yellen is done and that everything is behind us regarding Greece,” said a New York-based trader.

The improved tone has brought several issuers out of the woodwork, with euro issuance the flavor of the day among Latin American issuers.

The Mexican sovereign, rated A3/BBB+/BBB+, has launched a EUR1.25bn March 2024 at 110bp over mid-swaps and a EUR1.25bn March 2045 bond at 190bp over mid-swaps.

Further down the credit spectrum, Mexican cement company Cemex (B+/BB-) is trying its hand at a new euro-denominated 2023, with price talk set at 4.875% area, as well as a USD 2025 being talked in the 6.625%-6.75% range.

Books on the trade had breached the USD10bn mark by early morning as investors piled into a name that has become a high-yield benchmark among both EM and crossover accounts.

“The credit suffered when the US housing market suffered, but now that is coming back,” said a banker. “It is a credit that everyone knows, and they want to have it in their portfolios.”

Euro borrowing may still look expensive versus dollars, but for borrowers that can keep the original currency such trades make sense, the banker said. This applies to both Mexico and Cemex, which has operations in Europe.

“It can be expensive back to dollars, but it looks good as you have a visibly lower coupon,” he said.

Meanwhile, risk-on buying is lifting or at least supporting prices on most issues, as supply-starved investors look to put money to work after a lackluster start to the primary markets this year.

Petrochemical outfit Mexichem is holding its own despite disappointing results, said the New York trader, with its 2042s being bid at 110.625.

“It is higher and tighter even though earnings weren’t that good,” the trader said. “Mexichem’s curve is too steep relative to other credits in Mexico.”

With concerns about Greece and interest rates put into the background, the current rally in LatAm will be dependent on further supply, data from the US and earnings releases.

This comes as Brazilian oil entity Petrobras recovers from yesterday’s sell off in the wake of the Moody’s downgrade to junk, with the curve tightening around 5-7bp.

The 2016s, 2024s and 2044s were trading at 555bp-540bp, 568bp-558bp and 568bp-558bp earlier today.

“Management is saying all the right things, so let’s see if they come through,” said a second trader in New York. “The market is giving them the benefit of the doubt.”


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 Paul Kilby; Editing by Marc Carnegie)

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