By: Staff Writer
July 2, 2024
A United Nations Economic Commission for Latin America and the Caribbean (ECLAC) report said that capital inflows into the LAC was two thirds higher in the first four months of 2024 comparable to the same time period for 2023.
The inflows were mostly off of the strength of international bonds placed, which ECLAC said the LAC “issuers placed US$ 53 billion of bonds in international markets in the first four months of 2024. This total was 61.5 percent higher than in the same period in 2023. The market remained open to high-yield issuers from the region, but most of the region’s issuances (69 percent) came from the investment grade sector. After two consecutive years in which sovereign issuances surpassed the 50 percent mark, corporate bond issuances in the reporting period represented 58% of the total.”
The report, Capital flows to Latin America and the Caribbean: first four months of 2024, also said: “The average coupon in the first four months of 2024 remained high, only 0.3 percentage points lower than in the same period in 2023. Global financial conditions are still tight, as growth and inflationary pressures remain resilient, particularly in the United States, increasing the perception that global interest rates will remain higher for longer and reinforcing pressures on LAC central banks to cut rates more cautiously.”
The report added: “Credit quality momentum was a net positive over the first four months of 2024. Overall, 12 credit rating actions took place from January to April 2024, with a balance of 2 more positive credit rating actions than negative.”
Global financial conditions remain challenging for the region’s bond issuers however, as growth and inflationary pressures remain resilient, particularly in the United States, increasing the perception that global interest rates will remain higher for longer.
“The United States Federal Reserve has kept its benchmark interest rate unchanged at a range of 5.25 percent-5.50 percent since July 2023, the highest level since 2001. In addition, U.S. 10-year Treasury yields’ monthly average climbed from 4.02 percent in December 2023 to 4.54 percent in April 2024. The 10-year Treasury yield serves as a vital economic benchmark and when it moves higher, there is an adverse impact on borrowing costs and international bond issuances from the region.”
The report also said: “The region issued US$ 13 billion in international green, social, sustainability and sustainability-linked (GSSS) bonds in the first four months of the year, up 90% from the same period in 2023. This total represented a 24 percent share of the region’s total international bond issuance, up from 20 percent in the same period in 2023, but down from the record 35 percent annual share in 2023.”