So far this January, the Latin American debt market has been extremely active. Nearly 12 institutions have issued debt, 10 of which are corporate entities, with the remainder being government entities. In addition, three other companies are currently conducting roadshows and will issue bonds shortly (Ambipar, 3R Petroleum, and FS). This flow of issuances contrasts sharply with that of the previous year. In 2023, during the same time period, only three bonds were issued. The year-over-year change is primarily due to market conditions, which have maintained extremely restrictive interest rates. This led new companies to think twice before issuing debt in the international market, and prompted more experienced market participants—those with expertise in dollar-denominated bonds—to hold off on new issuances and wait for a more favorable interest rate environment.

The boom we’ve seen isn’t anything new; although 2023 was a fairly slow year, the years leading up to it were full of new issuances. It appears that the trend is picking up again, and the market is ready to inject the liquidity it had been holding back in anticipation of better investment opportunities. 

This trend is expected to continue, as the cycle of rate hikes is expected to be in its final phase. Today, the market prices in a 100% probability that the U.S. Federal Reserve will cut its policy rate by at least 25 basis points at its May meeting. Looking at countries in the region, Chile, Brazil, and Peru all moved quickly to implement this policy with the aim of reviving their respective economies. Current market expectations will encourage new issuers to enter the dollar-denominated fixed-income market. This trend began ten days ago with Valia Energía’s issuance of a 15-year bond worth US$530 million at a rate of 7.875. 

Fixed income still appears to be an attractive option, and the flurry of new issuances is expected to inject liquidity and further stimulate the bond market.

Cristián Zañartu

Latin America Fixed Income Analyst