Debt issuers in Latin America rush to secure current low interest rates

RIO DE JANEIRO, BRAZIL – “We will start to see a substantial improvement in issuance,” said Max Volkov, head of debt capital markets for Latin America at Bank of America. “April and May should be busier this year than in previous years because interest rates are going up,” he said in an interview.

According to data compiled by Bloomberg, governments and companies have borrowed about US$50.4 billion so far this year, excluding local issues. That’s the highest volume since 2017 when they raised US$57.2 billion in the same period.

Mexico returned to the dollar bond market on Tuesday for the second time this year and raised US$2.5 billion in 20-year debt. The issuance opens doors for other issuers in the region, Volkov said.

Bank of America – the fifth-largest underwriter of international bonds in Latin America this year – participated in the Mexico issue.

After a fast start to the year, the volume of Latin American bonds last month was reduced by interest rate volatility, which has since fallen. Issuers that chose to avoid March are preparing for offerings in April and May, Volkov said.

According to Jake Gearhart of Deutsche Bank, Chile, Peru, and Panama are among the investment-grade countries that can sell bonds. Chile issued a US$1.5 billion Formosa sustainability bond maturing in 2053 last week.

“Are they going to accelerate additional issuance plans in the second quarter?” Gearhart said in an interview Wednesday about Latin American issuers. “There are many good reasons to try that if you really believe that interest rates are going up. In our opinion, many issuers and investors are convinced of that.”

Other types of issuers in the region may follow suit. “With sovereigns opening the door to new issuance, we will start to see corporate and financial institutions next,” Volkov said.

The primary market is also receptive to issuers rated just below investment grade, even first-timers. Deutsche Bank has “a handful” of high-yield deals in the pipeline, Gearhart added.

Source: Infomoney