Buyside Piles Into Bigger Brazil Retap

Brazil flew in the face of wilting local equities to fortify its 10-year benchmark bond with a $750m retap, upsized from $500m on some $4.5bn in demand. The sovereign reopened the 5.875% of 2019s at 100.539 to yield 5.800%, or UST plus 252bp. After early whispers of 5.875% area, the issuer tightened to 5.800%-area guidance, and launched at 5.800%. Books were heard open for only a little more than an hour. Bankers away from the deal estimate a 20bp-30bp reopening premium, based on a pre-announcement trading price of around 102, generally giving the execution a thumbs up. Bankers on the deal pin the premium at 20bp. The premium compares to 50bp Brazil paid on the original $1bn issue, priced at a much higher yield of 6.127% or UST plus 370bp, which it subsequently boosted to $1.025bn. “I’d issue as much as I possibly could at these levels,” says an EM investor who participated, disappointed only that the hefty book meant allocations were small. Demand came from almost 200 accounts, say bankers on the transaction, with about 65% from the US, and 25% from Europe. Despite elevated demand, the sovereign decided to be cautious, as its main objective was tight pricing, the bankers say. Recent UST bond volatility was a concern – including a 20bp widening in the 10-year Thursday – and investors say this could pose a problem for the bonds’ trading going forward. The bonds were heard trading at around 100.5 late Thursday afternoon. Barclays and Citi managed the transaction. Brazil has the option to increase the transaction by up to 5% overnight during Asian market hours, as it did in the original, adding $25m the following day. The 2019 was launched in January.