Latin America Scraps $2 Billion Worth of Bond Sales as U.S. Rates Jump

May 7, 2018

May, 3 2018 (Bloomberg)

The angst surrounding higher U.S. rates has spread to Latin America’s bond market.

Four South American companies postponed at least $2 billion of planned U.S. dollar bond sales this week, according to five people familiar with the situation. This happened in the wake of 10-year U.S. Treasury yields climbing above 3 percent for the first time in four years and the dollar hitting its strongest level since January.

Argentina’s Petroquimica Comodoro Rivadavia SA and Telecom Argentina SA, Colombia’s Transportadora de Gas Internacional SA and Paraguay’s Banco Regional SAECA, suspended their debt deals after investors demanded yields about 100 basis points higher than expected, said the people, who asked not to be named as talks were private. The banks working with the companies to arrange meetings with investors include Citigroup Inc., JPMorgan Chase & Co. and HSBC Holdings Plc.

While PCR, TGI and Banco Regional declined to comment, Telecom, Argentina’s second biggest company, gave a reason for the postponement: the Federal Reserve.

“High volatility conditions in the market generated by the increase of 10-year T bond had a huge impact in all the emerging market planned sales, including Argentina,” the company said in email. “We will postpone until markets normalize.”

Amid the cancellations, Mexico’s state-controlled oil company, Petroleos Mexicanos, has found an alternative country to sell bonds: Switzerland. Avoiding the U.S. volatility, it sold 365 million Swiss francs ($366 million) of bonds due in 2023 at a 1.75 percent yield after having initially offered 250 million Swiss francs of debt, according to a company press release.

The sale was successfully completed “taking advantage of the window of opportunity presented in the financial market,” Pemex said.