Brazil Uncorks Duration

Capitalizing on ample liquidity and increasingly bullish Brazil sentiment, the sovereign has tapped its 7.125% of 2037 bond, paving the way for other LatAm borrowers to access duration. “Brazil effectively reopened the long end for emerging markets,” says a banker on the deal. The longest dated cross-border LatAm issue since May 2008 raised $500m at 108.630 to yield 6.450%, or T+195bp, on almost $7bn in orders. Guidance was 6.60% area, versus 110.8 to yield 6.30% at the Tuesday close, and the issue was up at 109.7 in the aftermarket. Bankers on the deal spotted the closing yield at 6.33%, making the concession just 12bp. They note that the sovereign was expecting to pay 15bp-20bp, and add that curve inversion helped it price through the 2019. Brazil had been heard mulling a tap for several days, and DCM bankers were strongly advising the trade based on firm investor demand, as demonstrated by hefty oversubscription for new LatAm issues. “Looking at the curve, I think it was pretty aggressive,” says a banker away from the transaction. “It’s a good sign for all the other issuers,” he adds. The deal – which high grade style was marked “will not grow,” excluding a 5% Asia greenshoe – takes the outstanding amount to $3bn. Deutsche Bank and JPMorgan led the trade, which went mainly to fund managers in the US. Besides encouraging opportunistic sovereigns like Colombia, Peru and Panama, Brazil’s success should also help Brazilian corporates achieve tenor. “There is appetite for duration, but only the right names,” says a banker on the Brazil tap. DCM bankers are advising all clients to seize the window while it lasts. The buyside has hurled almost $37.00bn in orders at the $6.25bn cross border LatAm flurry so far in July, a 13-fold leap versus the $470m dribble of July 2008. “The only surprising thing is what took them so long,” says a corporate debt analyst, who adds that a glut of US new issue in prior months proved liquidity was back. “It’s almost too good to be true,” c