Argentina

YPF, the Argentine state-owned oil and gas company, could return to bond markets next year after a busy 2016.

Bonds markets in Latin America were firmly in holiday mode this week but syndicate bankers appeared bullish about issuance prospects for 2017 after the region brushed off the US rates hike.

Aeropuertos Argentina 2000, the Argentine airport operator, is looking to return to bond markets in 2017 with a 10 year deal of up to $400m.

Bankers said that none of the three names in the visible Lat Am pipeline would be likely to issue any time soon as a sell-off in US rates brought sudden volatility to EM bond markets, even in economies not considered affected by a Donald Trump presidency.

Argentina’s return to international bond markets this year broke many records, and its after-market performance has been equally stunning. It has also changed investors’ concerns. Previously preoccupied with court rulings, an unpredictable government, legal technicalities and a curve comprising an assortment of complex instruments, bondholders now are looking at more conventional credit issues and can enjoy a normalised dollar curve with several liquid points. The buyside is now assessing inflation and inflation expectations, GDP growth and FDI, and — crucially — progress on the fiscal deficit.

Luis Caputo had been head of LatAm trading at Deutsche Bank and JP Morgan, but he’d never done a deal as important as the one facing him at the start of 2016. Few — if any — bankers ever do. Argentina’s finance secretary, known in the market as “Toto”, led the nation’s negotiations with holdout creditors, achieving a faster and cheaper resolution than most expected. This has left Caputo confident that the government will be able to do just as good a job in tackling the outstanding issues facing the economy.

Mauricio Macri’s government is having to find a fine balance between fiscal consolidation and suffering too much short term economic and political damage. Markets appear willing to finance gradual change, and economists back the government’s strategy, but improvements need to come quickly.

Argentinian debut international issuer Compania General de Combustibles (CGC) raised $300m on Wednesday, and while it offered a large pick-up over the sovereign, rival bankers were impressed that investor demand has extended to lesser known names in the region.

Banco Macro printed the largest Basel III compliant tier two bond from Argentina on Tuesday, slipping into the market with a yield palatable enough to attract a $900m book, even as investors begin to lower the amount of risk they are exposed to before year-end.

Eastern Argentine province Entre Ríos looks set to continue the run of Argentine provinces tapping international bond markets after announcing a roadshow beginning October 31.

Argentine province Santa Fe’s debut international bond issuance on Tuesday made it the second tightest sub-sovereign name in the Argentine credit spectrum as the region’s low leverage levels allowed it to price just 50bp wide of the City of Buenos Aires.

Argentina’s third largest private sector bank in terms of loan portfolio size, Banco Macro, will begin a roadshow on Wednesday ahead of a potential dollar bond issue.