Sunday , May 16 2021

Increasing rates generate fever in Chile

So far, in 2018, Chilean corporations have made 60 bonds for a total of $ 3.3 billion, an increase of 19% compared to last year.

Chilean companies are working full time to issue a new debt before and the Central Bank of Chile and the US Federal Reserve to meet the expected rate increases in the last month of the year.

Possible new issues will end with the sealing of the "good year" for the placements market in Chile. So far, in 2018, Chilean corporations made 60 bonds for a total of $ 3.3 billion, an increase of 19% compared to $ 2.8 billion, set in 2017 through 51 operations, according to data collected. by the Santiago Stock Exchange.

"This year there is a greater appetite because publishers are rush to borrow at rates still low," says Joaquin Aguirre, Tanner's strategy manager, adding that 2017 was a year marked by "strong economic and political uncertainty that has ceased to some extent good dynamics" at the market.

Latam Airlines, Arauko Park and Entelle will be among the companies that issue bonds. According to data collected by Bloomberg, Chilean corporations have sought authorization to receive up to $ 6 billion in the coming months on the debt market.

So far, most of the issues are in the Unidades de Fomento, an accounting measure in Chile indexed to inflation. So far, in the last quarter of the year, nine corporate bond plates have been made for a total of $ 699 billion, almost double the amount issued in the same period of 2017 in the same number of operations, according to Trading Santiago.

The Central Bank of Chile announced in September that it will begin to withdraw the monetary stimulus when inflation is below the target and given the dynamics in the economy. The issuer fulfilled its promise by increasing the reference rate in October to 2.75%. However, the market is divided over whether the board will maintain or increase the rate of the meeting on December 4th.

Interest rate swaps indicate that the market is pledging that the Central Bank will apply at least three additional increments of 25 basis points to 3.5%. For its part, Federal Reserve Chairman Jerome Powell kept the expectations for a possible pause in the monetary adjustment cycle in 2019, after this year it increased 75 basis points. The issuing authority will continue with new increases at its meeting on December 19th.

With rates still low, investors continue to buy everything that's on the market. "Investors continue to look for good returns, and we've seen interesting placements and a level of expansion much below historic," said Nevasa's assistant, Jorge Garcia.

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