Emerging market fixed income trading in Latin America: A growth story | Insights

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This article was written by Andrew Beacham, Emerging Markets Product Manager at Bloomberg. 

2023 was the best year for trading Latin American (LatAm) local currency bonds since 2009, and that growth is expected to continue according to the Economic Commission for Latin America & the Caribbean (ECLAC).

Local currency bonds returned 28.8% last year, making LatAm the best performing Emerging Markets (EM) sector, according to Bloomberg Intelligence.  An increasing percentage of this activity was done electronically. According to a recent survey by Coalition Greenwich, which looked at electronic trading in Latin American markets, “76% of study participants expect their e-trading adoption to grow in the coming year in at least one market segment, with local currency bonds garnering the most votes for more volume via the screen.”

According to ECLAC, “Local currency share of the region’s international bond issuances increased to 20% in the first ten months of 2023 from 8% in 2022. The increase was supported by decelerating inflation and currency appreciation in the first half of the year, with Latin American central banks being rewarded by foreign exchange markets for being early inflation fighters.”

While there is room to grow, market participants continue to show enthusiasm and optimism about the region. Markets in LatAm are varied, as each market has its own debt ownership profile, investor types, and market practices coupled with differences in languages, time zones and local market dynamics.

One notable area of growth is Mexico, which overtook Brazil as the largest LatAm local bond market, in terms of trading volume on Bloomberg. As a result, Bloomberg saw record client participation which resulted in record volumes. Most notably Mexico-based investors notched an increase in trading volume of over 215% year-over-year (YoY) growth in 2023. Bloomberg’s Electronic Trading Solutions saw a 63% YoY increase in Mexican Peso denominated bond volumes more broadly.

As LatAm markets continue their progress towards greater electronification, firms that trade local currency bonds are looking to technology partners like Bloomberg to access a wide network alongside integrated solutions and efficient workflows.

Bloomberg has provided trading solutions in Emerging Markets, including the LatAm region for nearly 25 years. As a result, Bloomberg has assembled an EM network with over 3,000 buy and sell side participants. Investors have access to real-time dealer contributions, which aids in price discovery. Clients can engage directly or decide to send a Request for Quote (RFQ) or Request for Market (RFM), based on these pre-trade contributions. When trading certain instruments, the ability to request an FX rate for both RFQ and RFM, is also supported by Bloomberg.

With offices in every major investment center in the LatAm region, Bloomberg is well-positioned to provide global and domestically based clients a differentiated local currency bond offering. LatAm local currency bond instrument coverage on Bloomberg includes:

Mexico-> MBONO, MCET, MUDI, MXN CORPS

Brazil-> BNTNB, BNTNF, BLTN, BLFTs, BRL CORPS

Chile-> BPTCL, BTUCL

Colombia -> COLTES

Peru -> PERUGB, PEN CORPS

Dominican Republic -> DOMREP

Uruguay -> URUGUA

 

Bloomberg’s Latin America IRS offerings include:

Vanilla – LATAM MXN ND CLP, ND BRL

OIS – LATAM ND COP

IMM – LATAM MXN

These offerings are part of Bloomberg’s Electronic Trading Solutions, which are used by leading financial institutions to trade efficiently in over 175 markets around the world. More than 90,000 client firms use Bloomberg Electronic Trading Solutions to access comprehensive depth and breadth of liquidity across asset classes from over 700 dealers globally. Bloomberg Electronic Trading Solutions provides market participants with comprehensive solutions across the trading lifecycle, including robust transparency, analytics, automation, and execution, powered by Bloomberg’s high-quality, multi-asset class data and tools. For more information, click here.

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