So far in January, the Latin American debt market has been extremely active. Nearly 12 institutions have issued, 10 of which are corporate entities, and the remainder are state-owned entities. In addition, 3 other companies are in the process of roadshows and will soon be issuing (Ambipar, 3R Petroleum and FS). This issuance flow contrasts sharply with the flow of the previous year. In 2023, within this same date range, only 3 bonds were issued. The change that can be seen year to year is mainly due to the market context, which has maintained an extremely restrictive interest rate level. This caused new companies to think twice before issuing debt in the international market, and the most experienced companies in the market with experience in dollar-denominated bonds to distance themselves from issuing new bonds and wait for a more favorable interest rate environment.

The boom that has been seen is not something new, although 2023 was a rather slow year, the years prior to that were avid in new issues. It seems that the trend is recovering and the market is willing to inject the liquidity that they were storing up waiting for better investment opportunities.

The trend is expected to continue, as the contractionary rate cycle is expected to be in its final phase. Today, the market has a 100% probability that the US Federal Reserve will reduce its monetary policy rate by at least 25 basis points at its May meeting. Looking at the countries in the region, Chile, Brazil and Peru all started this task promptly in order to reactivate their respective economies. Current market expectations will motivate new issuers to enter the dollar fixed income arena. This effect began ten days ago with the issuance of Valia Energía, which issued US$530 million for 15 years at a rate of 7.875.

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

Cristián Zañartu

Fixed Income Analyst Latam