The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.
CAPITAL MARKETS

Asian investors and Latin perps issuers get back into bed

The “marriage made in heaven” (as it has been described in the financial press) between yield-hungry Asian investors and perpetual bond-issuing Latin American companies turned hellish in May 2006.

The increase in US treasury rates suddenly made bonds that matured at the issuer’s discretion an extremely unattractive prospect, and the enthusiasm that retail and institutional investors across Asia had shown for the slew of perps that followed Pemex’s pioneering $1.75 billion deal in 2004 quickly vanished. Now there are tentative signs that a reconciliation might be at hand.

There was a rush of perpetual bond issuance at the end of 2006: perps have always been attractive products for issuers, which pay only a small premium on the price of a regular bond for the insurance of being able to decide whether or not to call the bond after a set date (usually five or 10 years). The trick has been to convince investors seeking the higher yields on offer to overlook or accept the risk that they might be left holding below-par paper when markets tumble. When bond markets are good, as they were until the Fed’s mid-2006 rate increases, this can be done; when they start to slide, the volatile perp market plummets faster than most.

Past forgotten

Now markets have recovered somewhat, cash-rich Asian retail investors are looking to invest and Latin American corporates seem to be hoping that past difficulties will be forgotten and new offers of perpetual bonds welcomed with open arms.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree