Analysis of the Impact of CAF's New Note Issuances on the Latin American Bond Market and Investors

Based on the detailed information collected, I am providing you with a comprehensive analysis report on the impact of CAF’s new note issuances on the Latin American bond market and investors.

---

CAF (Development Bank of Latin America and the Caribbean) completed several milestone note issuances in 2025 [0][1][2]:

Issuance Date	Issuance Size	Tenor	Coupon/Interest Rate	Investor Order Book
Early 2025	$2 Billion	5-Year	5.00%	Over $13.6 Billion
June 2025	$500 Million	Perpetual Hybrid Capital	6.75% (first 5.5 years)	Over $3.2 Billion
October 2025	€1.5 Billion	7-Year	Sustainable Bond	Over €14.9 Billion

On November 7, 2025, S&P Global Ratings upgraded CAF’s long-term foreign currency issuer credit rating from

, while also upgrading the rating of its perpetual hybrid capital notes to [2][3]. This rating adjustment reflects:

• Risk-Adjusted Capital Ratio
  increased from 21.7% in December 2024 to 27.5% in June 2025 [2]
• Number of member countries increased to
  24
  [2]
• The $7 billion paid-in capital increase approved in 2022 will be phased in between 2023 and 2036 [2]

---

CAF’s record-breaking issuances have injected significant liquidity into the Latin American bond market [0][1][2]:

• Outstanding bond size reaches $32.6 Billion
  , accounting for 76% of total liabilities [2]
• Issued in
  23 different currencies
  [2]
• Total global issuance size in 2025 reaches
  $7.5 Billion
  [2]
• Hedged local currency bond issuances support the development of local markets, expanding investor options and diversification sources [2]

As one of the multilateral financial institutions with the highest credit rating in Latin America, CAF’s issuance pricing provides an important

for the regional market [0][1]:

• The 5.00% coupon pricing of the $2 billion 5-year bond reflects the market’s high recognition of CAF’s credit quality [1]
• The 6.75% fixed rate (until 2030) of the perpetual hybrid capital note provides a pricing anchor for instruments with similar tenors [0]
• Investors can use CAF bond yields as a reference for evaluating other Latin American sovereign and corporate bonds

The

issued in October 2025 marks an important breakthrough for CAF in the field of sustainable finance [0][4]:

• This is CAF’s first public bond under its new sustainable financing framework [0]
• The order book exceeded €14.9 billion, setting a record for CAF’s largest order book across all currencies [0]
• Earlier in June 2025, CAF also issued a
  €100 million blue bond
  in partnership with the United Nations Development Programme to support coastal conservation projects [4]

These issuances have

, making the region one of the most active markets for blue debt globally [4].

CAF’s ongoing issuances have strengthened the connection between Latin America and global capital markets [1][2]:

• CAF has maintained continuous access to global capital markets for over
  30 consecutive years
  [1]
• Investors from Europe, the Middle East, and Africa accounted for 64% of the hybrid capital note subscriptions, with the Americas accounting for 31% and Asia accounting for 5% [0]
• This global investor participation helps to
  deepen regional capital market integration

---

CAF’s diversified issuance strategy provides investors with more options [0][1][2]:

Investor Type	Benefit Areas
Asset Management Firms	Gain access to high-quality, multi-currency fixed-income allocation options (accounted for 67% of hybrid capital note subscriptions) [0]
Pension Funds and Insurance Companies	Long-dated perpetual notes provide assets that match long-term liabilities (accounted for 12%) [0]
Hedge Funds	The 6x oversubscribed hybrid capital notes offer relatively high-yield investment opportunities (accounted for 13%) [0]
Central Banks and Official Institutions	Safe asset allocation options with AAA/AA+ credit ratings (accounted for 3%) [0]

CAF bonds provide investors with the

[0][1][2]:

• Credit Quality
  : The AA+ long-term rating (S&P) is one of the highest credit ratings in Latin America [2]
• Yield Attractiveness
  : Compared to similarly rated multilateral financial institutions in developed markets, CAF bonds typically offer a
  spread advantage
• Liquidity Assurance
  : Robust secondary market liquidity ensures investors can enter and exit positions flexibly [2]
• Capital Efficiency
  : Perpetual hybrid capital notes are classified as 100% equity by rating agencies [0], making them particularly attractive to capital-constrained investors such as banks

CAF’s issuances have promoted the diversification of the investor structure [0][1]:

• Geographic Diversification
  : Participation by investors from Europe, the Americas, and Asia reduces the risk of single-market volatility [0]
• Tenor Diversification
  : Offerings range from 5-year, 7-year to perpetual instruments, meeting different duration preferences [0][1]
• Currency Diversification
  : Bonds denominated in 23 currencies provide investors with foreign exchange risk hedging tools [2]

The allocation of CAF’s loan portfolio provides investors with

on changes in Latin America’s economic structure [2][3]:

• Infrastructure
  : Accounts for 42% of the loan portfolio [2]
• Transportation, Warehousing, and Communications
  : Accounts for 26% of the loan portfolio [2]
• Electricity, Gas, and Water
  : Key focus areas for investment [2]
• Non-Sovereign Sector Operations
  : CAF is strengthening its role in this area [2]

---

Funds raised from CAF’s issuances will directly support sustainable development in Latin America [0][1][2]:

• The loan portfolio recorded a
  5.2% compound annual growth rate
  from 2015 to 2024 [2]
• As of June 2025, the book value of loans reached
  $36.2 Billion
  [2]
• Funds are used for strategic projects in infrastructure, social inclusion, production transformation, and environmental sustainability [0]

CAF’s innovative financing instruments (such as hybrid capital notes) provide a new paradigm for optimizing the regional financial architecture [0][2]:

• Became the
  first multilateral financial institution in Latin America
  to incorporate hybrid capital into its financing strategy [0]
• After hybrid capital instruments were classified as 100% equity, CAF’s
  lending capacity can be increased to approximately 4 times the issuance size
  [0]
• This aligns with G20 recommendations on capital optimization for multilateral financial institutions [0]

CAF’s sound financial position provides a buffer for regional financial stability [2]:

• Short-term assets continuously cover short-term liabilities
  , with a 1-year static funding gap ratio of 1.7x [2]
• Strong liquidity ratios
  : 1.4x for 12 months, 2.2x for 6 months [2]
• Can withstand stress tests where 50% of undisbursed loans mature [2]

The

signed between CAF and the Central American Bank for Economic Integration (CABEI) demonstrates a new model of regional financial cooperation [2]:

• Helps to
  diversify sovereign risks
  [2]
• Enhances joint
  lending capacity
  [2]
• Provides a cooperation model for other regional financial institutions

---

Despite the overall positive nature of CAF’s issuances, investors still need to pay attention to the following risks [2]:

Risk Type	Details	Potential Impact
Regional Concentration Risk	Argentina, Ecuador, and Brazil account for 37% of the loan portfolio [2]	Regional economic fluctuations may affect asset quality
Venezuela Risk Exposure	Accounted for 5.3% of total loans in June 2025 (down from 14% in 2018) [2]	Geopolitical risk exposure
Interest Rate Risk	Some bonds have perpetual structures	Changes in the interest rate environment may affect secondary market valuations
Refinancing Risk	The first call option for perpetual notes is 5.5 years after issuance [0]	May face uncertainty in refinancing costs at that time

For different types of investors, the following strategies are recommended [0][1][2]:

• Allocation Investors
  : Can use CAF bonds as core holdings in Latin American fixed-income allocations to enjoy capital protection from high credit quality
• Income Investors
  : Focus on the 6.75% coupon of the perpetual hybrid capital notes, but need to assess interest rate reset risks
• Sustainable Development Investors
  : Actively participate in sustainable bond issuances to support regional green transition
• Trading Investors
  : Utilize the high liquidity of CAF bonds for spread trading

---

CAF’s new note issuances in 2025 have had

on the Latin American bond market and investors [0][1][2]:

1. Market Level
   : Record-breaking issuance size, establishment of yield benchmarks, promotion of sustainable finance, deepening of capital market integration
2. Investor Level
   : Expansion of high-quality investment opportunities, improvement of risk-adjusted returns, increase in diversified allocation options
3. Regional Development Level
   : Strengthening of development financing capacity, optimization of financial architecture, enhancement of regional stability

With S&P’s upgrade of CAF to AA+ [2] and its continuous innovative financing strategies, it is expected to further solidify its position as a

in the Latin American bond market and provide sustained impetus for the development of regional capital markets.

---

[0] CAF - Development Bank of Latin America and the Caribbean. “CAF launches its first Hybrid Capital issuance for USD 500 million.” https://www.caf.com/en/currently/news/caf-launches-its-first-hybrid-capital-issuance-for-usd-500-million/
[1] CAF - Development Bank of Latin America and the Caribbean. “CAF Kicks Off 2025 with the Largest Bond Issuance in its History printing USD 2 Billion.” https://www.caf.com/en/currently/news/caf-kicks-off-2025-with-the-largest-bond-issuance-in-its-history-printing-usd-2-billion/
[2] S&P Global Ratings. “Corporacion Andina de Fomento Upgraded To ‘AA+’ On Criteria Revision.” November 7, 2025. https://www.spglobal.com/ratings/en/regulatory/article/-/view/type/HTML/id/3475341
[3] CAF - Development Bank of Latin America and the Caribbean. “CAF S&P upgrades rating to AA+ from AA outlook stable November 2025.” https://www.caf.com/media/4679462/caf-sp-upgrades-cafs-rating-to-aaplus-from-aa-outlook-stable-november-2025.pdf
[4] Latin Lawyer. “Driving change: the rise of sustainable financing in Latin America.” https://latinlawyer.com/guide/the-guide-environmental-social-and-corporate-governance/fourth-edition/article/driving-change-the-rise-of-sustainable-financing-in-latin-america