Brazil DCM Key for Banks in 2H

While banks push to bring more ex-Brazilian issuers to the cross-border bond market in September, those who are present in Brazil’s domestic DCM – or would like to be – are also seeing that space as a priority to increase overall volume in the rest of the year. Local issuance remains strong due to a lower interest rate environment luring more issuers to market. Bankers see this change as structural and able to stand up to any struggles Brazil might have ahead on the macroeconomic front. “DCM markets continue to be much better than last year due to the activity coming from local markets. There is a big appetite for local credit in Brazil. Some times with lower spreads than at other times, but you always have a local market. It is different from the international market that can close,” says a senior Sao Paulo-based banker. “The local markets are strong, not only Brazil, but Mexico and other countries as well. That is something that is here to stay, as more companies get the alternative of funding in local currency, the local markets will take advantage of that,” says a New York-based DCM banker aiming to gain more volume locally. Larger issuers who are able are opting for Brazil’s local markets, such as Telefonica Brasil, who has approved the sale of up to BRL2bn ($990m) in domestic bonds. The operator of the Vivo brand plans a 2017 bond paying DI+0.75%. It is raising funds to invest in its 4G network, and repay local debt. It does not indicate manager of the sale, to be done under the rule 476 restricted format, and the company does not respond to a request for comment. Developer Cyrela is planning to sell BRL400m, it says. The 2017 debenture is expected to pay the DI rate plus 1.20% and amortize in two equal parts in each of the final two years. Proceeds will be used to repay debt. Caixa Economica Federal is managing the sale, rated Aa2 on a national scale and done under the rule 476 restricted format. Through August 17, there had been BRL8.31bn completed in the ru