The Long and Short
Corps new issuance at full speed, with little credit differentiation
This document is intended for institutional investors and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors.
Emerging markets corporate issuers have started the year strong, particularly in Latin American names. Companies are taking advantage of low yields to refinance debt at rates 200 bp to 300 bp lower, improve liability management and finance capex. Expected Latam issuance in 2021 is now at US$75 billion. New issues commonly have tightened 50 bp to 75 bp from price talk as books are strong. Year-to-date there has been 13 new corporate issuances out of Latam with an average size of US$500 million, and another five deals are marketing. Some companies are pre-funding maturities just to lock-in today’s low yields before US Treasury yields move higher. Many bonds look likely to be called or redeemed at their call date, as most of Latam callable bonds trade above call at very tight yield-to-call. As the second half of 2020 was very active for Latam investment grade names, 2021 has been more active so far for high yield issuers. The market it is very receptive to risk (Bs, new names) and not very selective. The search for yield and need to put additional capital to work continues to push many portfolios to expand their comfort zone.
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