The low country risk, the rate cut and the projections of improvement in the exchange rate contribute to a global bond placement scenario in the medium term.
Uruguay is going through a present of good opportunities to return to the international markets of sovereign debt, while its position on investors’ radars is consolidated as that of a stable country, boosted by the recent decision of the Central Bank (BCU) to lower interest rates and, therefore, improve dollar returns.
The conditions for Uruguay’s return to the international sovereign debt market with a bond issue in pesos either Indexed Units (UI) They are favorable. The last time the country issued globally was in 2020, and then the results were positive. Now, from the Ministry of Economy and Finance (MEF) put on the table the possibility of a new placement, also encouraged by the improvement in the credit rating received by Moody’s.
On the “international menu”, the portfolio led by Azucena Arbeleche has the possibility of issuing global bonds in pesos at a fixed rate and in UI, as well as the reopening of the Bond Indexed to Climate Change Indicators (BIICC) and a new Samurai bonus in Japan; As the director of the Debt Management Unit (UGD), Herman Kamil.
Is a “window of opportunity” opening for the issue?
The debate about a possible return of Uruguay to international markets through the issuance of sovereign debt It took place, as usual, on X (formerly Twitter) between different economic analysts. For the economist Aldo Lema, former member of Fiscal Advisory Council (CFA) of the MEF, “there are indeed good conditions” for the country to place global bonds in national currency.
Among the reasons mentioned, he pointed out a “very low” country risk—the sovereign debt spread once again broke historical lows, with 59 basis points according to the Risk Index Uruguay of the Uruguayan Electronic Stock Exchange (Irubevsa)and 65 bp in the Uruguay Bond Index (Urubi)which elaborates AFAP Republic—; the drop in rates in pesos in UI after the decision of the BCU to cut the Monetary Policy Rate (MPR); and there is also the recent rise in the exchange rate which, in April, accumulated a recovery of 2.92%, driven both by a lower yield of placements in pesos and, also, by the dollar strength on an international level.
“This is what is called a good ‘window of opportunity,’” agreed the former mayor of Financial Regulation of the Superintendency of Financial Services of the BCU, José Licandro. In any case, he pointed out that, to consolidate this possibility, a long-term reference is needed; something that the analyst also warned Rodrigo Sarachaga, of Sherpa Staff: “Today the longest is 2040.”
This is important since external investors, who observe the return in dollarsthey particularly consider what is the expected evolution of the exchange rate. Likewise, and in this sense, a positive impact of lower rates on the correction of the exchange delay It contributes to expanding the “window of opportunity” for a successful placement of global bonds in pesos or UI, precisely because of this improved performance in dollars in relation to the local currency.
Source: Ambito
