| NEW YORK, March 30
NEW YORK, March 30 Latin American governments
and companies could soon step up bond sales, seizing on an
increased appetite for deals as a regional economic recovery
gains steam and concerns about aggressive U.S. policy changes
ease, bankers and investors said this week.
Returns on Latin American bonds remain attractive and the
new openness to deals has already allowed Brazil's government to
raise funds at a record low yield.
Argentine's Santa Fé province also recently returned to the
capital market after a long hiatus.
Brazil's Suzano Papel e Celulose SA's is one
example of the warmer reception for Latin American debt.
Its recent sale of a 30-year junk global bond - the first of
its kind by a Brazilian company - underscored investors'
receptiveness to less traditional structures, bankers said.
Brazilian logistics firm JSL SA could be next in
line, two people familiar with the plans said.
Concerns that U.S. President Donald Trump would lure capital
out of Latin America have subsided, according to bankers, who
spoke on background on the eve of Brazilian bank Itau BBA's
annual debt capital markets conference in New York.
That, coupled with market stability after the U.S. Federal
Reserve's single rate hike so far this year, is fueling inflows,
the bankers added.
Emerging market funds registered a $6.5 billion net inflow
in the week ending March 22, their highest in nearly four years,
Institute of International Finance data showed. About $4.5
billion of that total went to bonds.
"We'll still see a lot of debt refinancing deals, but there
are a few first-time issuers tapping the market," said Felipe
Wilberg, global head of fixed income for Itaú BBA, Brazil's
largest corporate and investment bank.
Cheaper funding for the region's borrowers largely hinges on
governments' ability to push ahead with key reforms ahead of a
busy Latin America election calendar, Wilberg said.
Investors had initially expected Trump-related turmoil to
slam the brakes on access to capital markets in Latin America,
which has struggled with the end of a decade-long commodities
The premium that investors demand to own Latin American
bonds over U.S. Treasuries now stands at about 7.6 percentage
points, compared with about 7.1 points at the start of the year,
according to JPMorgan's EMBI Diversified Latin America bond
DIFFERENT INVESTOR REACTION
However, the pushback has been minor relative to prior U.S.
tightening cycles that triggered violent swings in Latin
American issuers' borrowing costs.
"Although conventional wisdom states that U.S. rate hikes
lead to pressure on asset prices in emerging markets, we are
seeing a different reaction from investors," said Marc Nachmann,
head of Latin America for Goldman Sachs Group Inc.
Western Asset Management Co has raised the Latin America
share of its emerging markets debt positions to 47 percent from
40 percent over the past year, as prices turned attractive and
the outlook improved, said Mark Hughes, who helps oversee $40
billion in bonds for the firm.
The ramp-up has been gradual though, Hughes said, noting
that bonds from Brazilian exporters now offer a better entry
point than those of domestic-oriented companies.
Latin American sovereign and corporate borrowers have raised
$34 billion from sales of global debt this year, Itaú BBA data
showed. Last year, bond borrowing in the region reached $102
Bankers are raising their estimates for new Latin American
bond supply this year to $80 billion from as low as $60 billion
in November as initially negative sentiment on Mexico has
In the case of Brazil, President Michel Temer's progress in
pushing reforms is fueling demand for bonds like Suzano's.
"When the deal hit the road, we sensed that investors were
in general more optimistic about fiscal consolidation than they
were a year earlier," Marcelo Bacci, Suzano's chief financial
officer, said in an interview.
(Editing by Guillermo Parra-Bernal, Christian Plumb and Tom