Honduras Bonds Rally

Investors betting that Honduras new President for 2014 – 2018 term Juan Orlando Hernandez will hold down the budget deficit and seek aid from the IMF which helped the country’s debut dollar bonds return 6.3 percent since the vote, compared with a 1 percent loss for Latin America debt over the same period, according to data compiled by Bloomberg and JPMorgan Chase & Co.

Honduras Currency

Honduran Bonds Rally since the election of Juan Orlando Hernandez as the President of Honduras for the 2014 to 2018 term.

“A swift dialog with the IMF, which doesn’t have to be rushed, but to reassure his commitment to open a program with the fund would be a positive signal,” said Miguel Gandolfo, an emerging-market analyst at F&C Asset Management Plc in London.

Economic progress may depend on the government’s ability to control drug violence in the nation bordered by Guatemala, El Salvador and Nicaragua. Hernandez backed Lobo’s strategy of deploying 4,000 military policemen to the streets to lower the homicide and other crime rates.

“Honduras remains exposed to the threat of well-armed, well-funded transnational criminal organizations,” according to the U.S. State Department 2013 report.

The country of 8.4 million people has become a transit point for drug shipments, with 87 percent of all cocaine smuggling flights departing South America for the U.S. stopping in Honduras in 2012, according to the State Department.

Honduran Bonds Background:
Illiquidity causes bond issue in Honduras
The bond issue has a national economy in a bank liquidity crisis, lamented Juan José Lagos, president of the Microfinance Network of Honduras (REDMICROH).

The lack of liquidity that records the financial system, experts in finance, is because they have invested heavily in bonds, in activities that are not as productive and this has limited the ability of financial institutions to meet demand .

“In the coming years there will be very limited resources … many resources are being directed to buy government bonds and is leaving the system with liquidity and this somehow also bring higher costs, “said Lagos to emphasize that the money escasearse prices rise, interest rates and the high cost of production.

In that sense, the impact will be felt in the energy, fuel, labor. To illustrate how the bond sale is affecting, Lagos addressed the Honduran Bank for Production and Housing (Banhprovi), state financial institution that this situation has not been able to expand its resources and meet the growing demand. He noted that the bank has estimated that over 3,500 million lempiras dammed in unattended resources and growing demand of about 200 to 300 million monthly lempiras.

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