Uruguay seeks longer-dated dollar-denominated bonds this year in order to mitigate FX risks and capitalize on the developments it has made in its local currency yield curve.

During an online presentation on Thursday morning, the sovereign issuer’s debt management unit (DMU) said Uruguay sought up to $2.7bn worth of bonds in 2018.

The priority for Uruguay is building its peso-denominated yield curve after two global-local currency issuances in 2017. Uruguay also did not rule out retapping its 2022 or 2028 benchmark notes this year.

“We would like to continue developing the nominal peso curve… It makes sense to extend the duration, or retap the 2022 or 2028 benchmark bonds,” a member of the DMU said in the Q&A session.

Regarding dollars, the DMU said this proved the most “stable source” of funding for the country. “It provides opportunities to extend duration… We do not rule it out because it is the most efficient market for us.”

In October, Herman Kamil, Uruguay’s head of public debt told LatinFinance the sovereign would return to the dollar bond market this year.

Last September, Uruguay raised the equivalent of $1.1bn in 10-year global peso bonds at 8.625%. In June last year, Baa2/BBB/BBB- rated Uruguay printed the equivalent of $1bn in 9.875% 2022 peso paper.

Back in October 2015, Uruguay raised $1.205bn in 4.375% 2027 amortizing bonds.

Sovereign options

While Uruguay prefers dollars and pesos, the sovereign issuer has received inquiries for euro- or yen-denominated paper. During the presentation, the DMU said it had swapped some existing debt for euros.

“Some feedback from Europeans, they would like to see Uruguay,” he said. “If we go there [To Europe] we need a constant presence… Not going just once, but going frequently,” he added of Uruguay conducting a euro-denominated securities sale.

For now, conducting swaps into euros seems the more prudent option for the sovereign issuer, rather than issuing new debt in the primary bond market.

In Japan, Uruguay sold Samurai bonds back in 2007 and 2011, both with guarantees from the country’s export credit agency, the Japan Bank for International Cooperation (JBIC).

“Right now, we are not thinking of going immediately,” the DMU representative said in reference to printing debt in Japan’s bond market. “But according to potential demand, it could make sense, but not in the very short-term.”

In May 2011, Uruguay raised ¥40bn ($493m at the time) in 2021s, pricing the paper at par with a 1.64% coupon. March 2007 saw Uruguay pay a 2.35% annual fixed-rate for ¥30bn in 10-year Samurai paper.

Uruguay forecasts 3% in real GDP growth this year, in line with 2017. During the presentation, the DMU said inflation had fallen back within the country’s target band. Its global fiscal deficit was -3.5% at the end of 2017 and aims to bring this to -2.5% by the end of 2019.