Peru pushes local bond markets
May 30, 2017 |
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 LatinFinance.
"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 more money."
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 soles."
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.
The sovereign printed the equivalent of $3bn in 2028 sol-denominated bonds in September last year and used proceeds to term out debt.