(Bloomberg) -- Panama and Guatemala tapped international debt markets on Wednesday, with both Central American nations shrugging off a recent drop in their existing notes as global yields surge.
Panama sold $1 billion of bonds due in January 2036 at 235 basis points over similar maturity US Treasuries, according to a person familiar with the matter, who asked not to be identified because the details of the transaction are private. The government also added $400 million to its existing 2054 dollar bonds at a yield of 7.45%, the person said.
Elsewhere, Guatemala sold $565 million of nine-year bonds to yield 7.05%, fractionally below the guidance of about 7.1%, according to a person familiar with that transaction, who also asked not to be identified because they’re not authorized to speak about it.
The sales come as existing dollar bonds from both nations underperform their emerging-market peers. Panama’s sovereign bonds have handed investors a 5% loss this month, making them one of the worst performers across emerging markets. The notes were punished after a severe drought lowered water levels in the Panama Canal — a key part of the local economy — limiting traffic, and amid uncertainty ahead of next year’s general election.
“Panama has important fiscal challenges ahead, including the expected drop in revenues from the Canal and the uncertainty regarding the approval of the new mining concession contract,” said Fernando Losada, a managing director for fixed income at Oppenheimer & Co. “It is a bit surprising that they are issuing 12-year notes as they have heavy amortizations on that part of the curve.”
Guatemala’s sale, meanwhile, caught some investors by surprise, Barclays strategist Jason Keene wrote in a note. The country has strong fiscal balances and over $20 billion in reserves, while the yield on US 10-year Treasury notes — a crucial benchmark — sits at cyclical highs, Keene said.
Guatemala’s outstanding dollar debt has underperformed emerging-market peers this month, handing investors losses of about 2.6%, according to data compiled by Bloomberg.
That underperformance comes after President-elect Bernardo Arévalo said he would withdraw temporarily from the transition process after prosecutors raided electoral offices and opened boxes of votes.
--With assistance from Christopher DeReza and Zijia Song.
(Corrects maturity in first deck headline, second paragraph.)
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