LatinFinance - July 2013 - 10
US rates
The writing on
the wall
By Katie Llanos-Small and Taimur Ahmad
Fears are growing that an era of cheap and easy credit for emerging
market companies and nations has drawn to a close. What comes
next is unlikely to be pretty
A
s the year began, it seemed there
could hardly have been a better
time to be a borrower in Latin
America.
By January, the average yield on
10-year emerging market dollar bonds
had dropped to its lowest ever level – at
4.5%, it was trading at an unprecedented
2.5 percentage-point premium over US
Treasuries. And in the first months of
the year, borrowers of all stripes – from
Bolivia to Honduras – piled into the debt
capital markets to take advantage of the
historically cheap funding.
For many, the challenge was how
to lock in the cheapest rates in an
environment where funding costs were
dropping by the day.
“It’s very hard to say that you’ve issued
a very good transaction because you
never know if tomorrow or the day after
someone else will come and issue even
more cheaply,” said Jayme Fonseca, CFO
of Brazilian construction firm Odebrecht.
In April, the company borrowed 500
million reais of five-year paper at a yield of
8.375%. Just a few weeks later, similarly
rated Brasil Foods (Baa3/BBB-/BBB)
successfully pushed the yield on its fiveyear real tranche to 7.75%.
Yet Fonseca need not have lamented
the timing of Odebrecht’s deal: by June,
the bonds, which had been trading at
10 LatinFinance
July 2013
yields as low as 7%, had widened to more
than 9%.
Growing anxiety over an early end
to the US Federal Reserve’s program
of quantitative easing had triggered a
re-pricing of risk across credit markets.
By the end of May, yields on 10-year US
Treasuries had jumped 50 basis points
from four weeks earlier to 2.16% as a
growing number of investors bet on an
earlier than expected exit from ultra-loose
policy in the US.
The turning point came on June
19, when Fed chairman Ben Bernanke
made clear the central bank intended to
wind down its $85 billion monthly bond
purchases, starting by year-end. The
sell-off in emerging markets intensified to
levels not seen since the dark days of the
2008/2009 global financial crisis.
End of an era
Emerging market debt funds were
hammered. Investors pulled $2.6 billion
from those funds in the week to June 19
alone, representing one percent of total
assets under management, according
to Barclays and EPFR data. By then, the
total year-to-date performance loss had
hit 7.35%, according to Lipper, the data
provider.
As money gushed out of emerging
market bond funds in May and June, a
LatinFinance - July 2013
Table of Contents for the Digital Edition of LatinFinance - July 2013
Latin Finance - July 2013
Same movie, different channel
Safe haven
Life after default
New construction
Ahead of the pack
Juicing up
Breezing forward
Turn of fate
Wing and a prayer
LatinFinance - July 2013 - Latin Finance - July 2013
LatinFinance - July 2013 - Cover2
LatinFinance - July 2013 - 1
LatinFinance - July 2013 - 2
LatinFinance - July 2013 - 3
LatinFinance - July 2013 - 4
LatinFinance - July 2013 - 5
LatinFinance - July 2013 - 6
LatinFinance - July 2013 - 7
LatinFinance - July 2013 - 8
LatinFinance - July 2013 - 9
LatinFinance - July 2013 - Same movie, different channel
LatinFinance - July 2013 - 11
LatinFinance - July 2013 - 12
LatinFinance - July 2013 - 13
LatinFinance - July 2013 - 14
LatinFinance - July 2013 - 15
LatinFinance - July 2013 - Safe haven
LatinFinance - July 2013 - 17
LatinFinance - July 2013 - 18
LatinFinance - July 2013 - 19
LatinFinance - July 2013 - Life after default
LatinFinance - July 2013 - 21
LatinFinance - July 2013 - 22
LatinFinance - July 2013 - 23
LatinFinance - July 2013 - New construction
LatinFinance - July 2013 - 25
LatinFinance - July 2013 - Ahead of the pack
LatinFinance - July 2013 - 27
LatinFinance - July 2013 - 28
LatinFinance - July 2013 - 29
LatinFinance - July 2013 - 30
LatinFinance - July 2013 - 31
LatinFinance - July 2013 - 32
LatinFinance - July 2013 - 33
LatinFinance - July 2013 - 34
LatinFinance - July 2013 - 35
LatinFinance - July 2013 - 36
LatinFinance - July 2013 - 37
LatinFinance - July 2013 - 38
LatinFinance - July 2013 - Juicing up
LatinFinance - July 2013 - 40
LatinFinance - July 2013 - 41
LatinFinance - July 2013 - Breezing forward
LatinFinance - July 2013 - 43
LatinFinance - July 2013 - 44
LatinFinance - July 2013 - Turn of fate
LatinFinance - July 2013 - 46
LatinFinance - July 2013 - 47
LatinFinance - July 2013 - Wing and a prayer
LatinFinance - July 2013 - Cover3
LatinFinance - July 2013 - Cover4
https://www.nxtbook.com/nxtbooks/latinfinance/0319QMR
https://www.nxtbook.com/nxtbooks/latinfinance/1218JYM
https://www.nxtbook.com/nxtbooks/latinfinance/paraguay_2018
https://www.nxtbook.com/nxtbooks/latinfinance/8320YTM
https://www.nxtbook.com/nxtbooks/latinfinance/8465TBM
https://www.nxtbook.com/nxtbooks/latinfinance/1476YBW
https://www.nxtbook.com/nxtbooks/latinfinance/7835THM
https://www.nxtbook.com/nxtbooks/latinfinance/8655TGL
https://www.nxtbook.com/nxtbooks/latinfinance/0614IJP
https://www.nxtbook.com/nxtbooks/latinfinance/ecuador_20170910
https://www.nxtbook.com/nxtbooks/latinfinance/2713KNP
https://www.nxtbook.com/nxtbooks/latinfinance/4982CFT
https://www.nxtbook.com/nxtbooks/latinfinance/7803HWE
https://www.nxtbook.com/nxtbooks/latinfinance/3829THA
https://www.nxtbook.com/nxtbooks/latinfinance/7891MDD
https://www.nxtbook.com/nxtbooks/latinfinance/7714JCR
https://www.nxtbook.com/nxtbooks/latinfinance/5619CMK
https://www.nxtbook.com/nxtbooks/latinfinance/6939ASL
https://www.nxtbook.com/nxtbooks/latinfinance/1364ASF
https://www.nxtbook.com/nxtbooks/latinfinance/0453DAS
https://www.nxtbook.com/nxtbooks/latinfinance/0453DAS_supp
https://www.nxtbook.com/nxtbooks/latinfinance/1304APV
https://www.nxtbook.com/nxtbooks/latinfinance/7234GSD
https://www.nxtbook.com/nxtbooks/latinfinance/1643XGS
https://www.nxtbook.com/nxtbooks/latinfinance/9511JKM_supp
https://www.nxtbook.com/nxtbooks/latinfinance/9511JKM
https://www.nxtbook.com/nxtbooks/latinfinance/8745TNV
https://www.nxtbook.com/nxtbooks/latinfinance/3629PBC
https://www.nxtbook.com/nxtbooks/latinfinance/7466TBC_HSBC
https://www.nxtbook.com/nxtbooks/latinfinance/7466TBC_supp
https://www.nxtbook.com/nxtbooks/latinfinance/7466TBC
https://www.nxtbook.com/nxtbooks/latinfinance/9463RVB
https://www.nxtbook.com/nxtbooks/latinfinance/7345GPY
https://www.nxtbook.com/nxtbooks/latinfinance/6398TVB
https://www.nxtbook.com/nxtbooks/latinfinance/4899EXM_supp
https://www.nxtbook.com/nxtbooks/latinfinance/4899EXM
https://www.nxtbook.com/nxtbooks/latinfinance/3885CWS
https://www.nxtbook.com/nxtbooks/latinfinance/45923GBC
https://www.nxtbook.com/nxtbooks/latinfinance/67449NBD
https://www.nxtbook.com/nxtbooks/latinfinance/46733NLP
https://www.nxtbook.com/nxtbooks/latinfinance/78456HCL
https://www.nxtbook.com/nxtbooks/latinfinance/89456RBM
https://www.nxtbook.com/nxtbooks/latinfinance/22278HBL
https://www.nxtbook.com/nxtbooks/latinfinance/2895YBM
https://www.nxtbook.com/nxtbooks/latinfinance/9033TBM
https://www.nxtbook.com/nxtbooks/latinfinance/8934TNP
https://www.nxtbook.com/nxtbooks/latinfinance/costarica20130304
https://www.nxtbook.com/nxtbooks/latinfinance/4672PNB
https://www.nxtbook.com/nxtbooks/latinfinance/9377BKL
https://www.nxtbook.com/nxtbooks/latinfinance/drmtest
https://www.nxtbook.com/nxtbooks/latinfinance/drmtest2
https://www.nxtbook.com/nxtbooks/latinfinance/5532LMC
https://www.nxtbook.com/nxtbooks/latinfinance/9044TBM
https://www.nxtbook.com/nxtbooks/latinfinance/4877RBC
https://www.nxtbook.com/nxtbooks/latinfinance/3008JHV
https://www.nxtbook.com/nxtbooks/latinfinance/3728YBC
https://www.nxtbook.com/nxtbooks/latinfinance/9337KLM
https://www.nxtbook.com/nxtbooks/latinfinance/5674GNJ
https://www.nxtbook.com/nxtbooks/latinfinance/8330KMC
https://www.nxtbook.com/nxtbooks/latinfinance/7663HCM
https://www.nxtbook.com/nxtbooks/latinfinance/2319ZMB
https://www.nxtbook.com/nxtbooks/latinfinance/7110MKL
https://www.nxtbook.com/nxtbooks/latinfinance/8599FHG
https://www.nxtbook.com/nxtbooks/latinfinance/4517HJK
https://www.nxtbook.com/nxtbooks/latinfinance/7813GHB
https://www.nxtbook.com/nxtbooks/latinfinance/1564FBM
https://www.nxtbook.com/nxtbooks/latinfinance/8884HGV
https://www.nxtbook.com/nxtbooks/latinfinance/7863SVB
https://www.nxtbook.com/nxtbooks/latinfinance/5233SFB
https://www.nxtbook.com/nxtbooks/latinfinance/5899SML
https://www.nxtbook.com/nxtbooks/latinfinance/4311PMN
https://www.nxtbook.com/nxtbooks/latinfinance/1366FBB
https://www.nxtbook.com/nxtbooks/latinfinance/9355AXC
https://www.nxtbook.com/nxtbooks/latinfinance/8559EBN
https://www.nxtbook.com/nxtbooks/latinfinance/8244QXC
https://www.nxtbook.com/nxtbooks/latinfinance/1779BBN
https://www.nxtbook.com/nxtbooks/latinfinance/7144XVB
https://www.nxtbook.com/nxtbooks/latinfinance/8971QGH
https://www.nxtbook.com/nxtbooks/latinfinance/200805
https://www.nxtbook.com/nxtbooks/latinfinance/200804
https://www.nxtbook.com/nxtbooks/latinfinance/200803
https://www.nxtbookmedia.com