Peru pushes local bond markets
The sovereign issuer is banking on an agreement with Euroclear to build a curve in both dollars and soles
Peru has accelerated plans to develop its local
capital markets and soon expects to sign an agreement with the
clearing house Euroclear, Finance Minister Alfredo Thorne told
"Our objective is to give high liquidity to the
soberanos market," Thorne said, referring to
Peru’s local bonds. "So we are very reluctant to
issue anything that is not Euroclearable."
Peru markets local currency bonds to international
investors under its Global Depositary Notes (GDN) program, but
Thorne said a switch to Euroclear would cut foreign exchange
costs for bond buyers.
"We want to transfer the benefits directly to
investors and make it cheaper to come in and out of the
soberano market," he added.
The Andean nation has no immediate plans to tap
the debt capital markets, but Thorne said anything from Peru
this year would involve a liability management exercise.
"It is going to be a 'no-cash’
transaction... We will be opportunistic in reducing our
financing costs and essentially getting a debt profile that is
more geared to our interests," he said. "We do not need any
Thorne also said the country needs to create two
"highly liquid benchmark" bonds, one in dollars and the other
in Peruvian soles. He said the shorter-dated end of
Peru’s debt curve would likely consist of dollar
bonds, while the medium and long-term parts would be
concentrated in soles.
"The middle or the long end is soberanos. We have
made progress on extending the duration on these," Thorne said.
"We will do our estimates on where the value is in the curve
and issue on those points."
In the future, Peru wants the soberano market to
serve as a benchmark for the country’s corporate
bond issuers. Thorne said he would also like to see the
Peruvian firms that issue Rule 144A/Reg S bring that debt back
to the local market.
"Most corporates in the past have gone towards
foreign markets, and that put pressure on our exchange rate,"
he said. "We would like to see most of the new issues coming in
Local currency bond sales from Peruvian issuers
took off at the start of this year, with 14 issuers raising
$726m in the first 40 days of 2017. The total represented more
than 37% of the $1.92bn recorded in 2016, according to data
from the local securities regulator SMV.
printed the equivalent of $3bn in 2028 sol-denominated
bonds in September last year and used proceeds to term out