Fitch: Issuance of sovereign bonds provides economic stability for Peru

Lizardo Vargas-RevillaPartner, Valinvest

The issuance of Peruvian bonds equivalent to US$4 billion, including one due in 101 years, shows the country’s macroeconomic strength, which was a key factor for this successful operation, Director of Sovereigns for the Americas at Fitch Ratings Kelli Bissett-Tom affirmed on Thursday.

“This issuance confirms Peru’s macroeconomic solvency and generates market stability expectations about the administration of President Francisco Sagasti,” she told El Peruano official gazette.

The result of this issuance underpins the credibility of the Peruvian economy among international investors, although there are still challenges that the country, and the Government in particular, have to face.

New challenges

“We hope that the upcoming administration will face immediate key challenges regarding the credibility of fiscal policy over the deficit reduction pace; labor, social security, pension, and fiscal reforms, which became urgent because of the crisis and political response,” Bissett-Tom explained.

In addition, the analyst emphasized that authorities’ future decisions on political issues shall include —for example— “the appointment of the Constitutional Court members and the reforms that economists urge to revive so that Peru can grow more rapidly,” she added.

On the other hand, the rating agency has assigned ‘BBB+’ ratings to Peru’s 2032, 2060, and 2121 century bonds totaling US$4 billion.

According to Fitch, the US$1 billion 3.23% note due 2121 marks the issuance of Peru’s first 100-year bond. This international operation constitutes a historical issuance of Peruvian sovereign bonds.

The sale came amid a positive scenario motivated by the strong demand from institutional investors, offering a spread of 100, 125, and 170 basis points, respectively, over U.S. Treasury notes.