On Wednesday 13th, the inflation figure for the U.S. economy was released, which registered a variation of 1.3% versus 1.1% expected by the market. What happened in the market? Well, of course, this generated a strong sell-off for the U.S. basis, which rose to 3.2% in the case of the 2-year treasury, and to 3.06% in the case of the 10-year treasury. Moreover, dealers are already discounting, with a non-negligible probability of 66%, a 100 basis point hike by the Fed at its July meeting.

This scenario only further complicates market liquidity, leaving any short-term refinancing for the Latin American debt market practically off the map.This scenario only further complicates the liquidity of the market, leaving practically off the map any type of refinancing in the short term for the Latin American debt market. those companies with credit ratings below investment grade (High Yield companies) will have a Herculean task to get their funding plans off the ground in the short term. funding plans in the next 1 to 2 years.

In the region, there are 12 corporate bonds i) high yield that trade ii) below 90% of their par value, and iii) mature before the end of 2024. Within this group of companies we can mention in Brazil: the cement company Intercement and the airline Azul. cement company Intercement and the airline Azul.in Mexico is the case of the leasing companies Unifin, Mexarrend, Financiera Independencia and, the latest to enter this list, the telecommunications company telecommunications company Axtel. We will have to see if the market manages to generate instances for the refinancing of these debts and if the ability of the CFOs proves to be enough to keep the financial health of these companies afloat.

Adolfo Erpel

Money Desk Analyst