Surprise Quasi-Sovereign Activates DCM

Brazil’s BNDES has inaugurated what should be a busy 2010 for DCM, beating sovereigns to the punch with $1bn in 2020s priced tighter than investors wanted. The issuer landed bang on 187.5bp-area guidance, some 70bp-80bp wide to the sovereign and 15bp-20bp above existing BNDES 2019s, say bankers and investors. The government development bank priced the Baa2/BBB minus bond at 98.949 with a 5.500% coupon to yield 5.634%, or UST plus 187.5bp. The deal ended flat to slightly down, traders say, likely owed to tight pricing. The book was heard to reach almost $3bn, with the BNDES indicating in the morning that the bond would not grow. “There should be a rush to get out the door – issuers want to get deals done before Treasuries rise,” says a major London-based EM investor who passed, noting a thin spread to the sovereign. The investor adds that that with US data improving, interest rates may rise sooner than expected. About 55% of the 2020 went to US investors, 35% to Europe and 10% to Asia and LatAm, according to bankers on the sale, who also note significant US high grade presence. “Crossover from high-grade buyers becomes more with every [LatAm investment grade] transaction,” says a banker managing the sale. Barclays and HSBC ran the sale, which comes 6 months after a $1bn 2019 bond priced to yield 6.45%. The BNDES has become a more regular issuer since returning in May 2008 after a 7-year hiatus, and should be much more frequent as it continues to bolster the Brazilian corporate sector. Bankers away from the trade note that it might serve as a useful benchmark for Banco do Brasil, rumored to be coming soon with a 10-year. Investors also expect Mexico, Colombia or the Brazilian sovereign to tap this week, as per tradition, and note there is still plenty of money to be put to work.