Trump, Fed Seen Risking $127 Billion Bond Spree In Latin America

(MENAFN- Live Mint) A debt-sale bonanza that saw Latin American borrowers rush to global markets at the fastest pace in three years is set to peter out in 2025.

Record government bond sales, a slew of first-time borrowers and a pickup in Argentina corporate transactions propelled $127 billion of issuance abroad last year, a 42% jump from 2023. The biggest underwriters of those deals are forecasting a similar, or even slightly higher number this year.

Standing in the way, though, are questions over the federal Reserve's path on interest-rate cuts, Donald Trump's return to the White House and concerns over China's economy. Political risks flaring up in countries like Brazil and Colombia, plus a spate of elections, could also put a dent in the debt spree.

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It's a litany of challenges shared across emerging markets. But Latin America issuance is more sensitive to the outlook for the US economy and rates, said Sergey Dergachev, head of emerging-market corporate debt at Union Investment Privatfonds GmbH in Frankfurt.

“Latin America will continue issuing but will be selective,” he said. The region“will have to navigate between Trump's new economic and geopolitical policies and the Fed reaction function. The environment can become more volatile.”

The big driver is how quickly the Fed will move to lower rates, with traders recently paring bets to just two cuts this year. They'll be watching for clues on whether measures planned by the Trump administration - from tariffs to mass deportations - will fan inflation, translating into fewer cuts and narrowing the window for debt sales.

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