Brazil Locks in Low Coupon

Brazil has sold $1.25bn in 2023 bonds, and continuing to push its debt coupon levels to new lows. Putting in for some $4.5bn in orders, investors appeared to see limited to fair value. The new bond priced at 99.456 with a 2.625% coupon to yield 2.686%, or UST+ 110bp, tight to 115bp-area guidance. The bonds traded up 0.25-0.30 points in the grey late Wednesday, according to investors. Bankers away from the deal estimate Brazil offered roughly 10bp concession, while lead managers saw 5bp-10bp. The deal appeared to check the right boxes for the Brazilian borrower with respect to low interest rates and investor appetite for quality EM credits. “Brazil is a name everyone is comfortable with and though the deal was not particularly cheap, we are living in a new environment where investment grade EM sovereign paper is viewed as a credit positive compared with European periphery names,” says a London-based EM investor eyeing the trade. “Yields and spreads are at an all time low and Brazil has not issued a 10-year since 2010, so the deal makes sense,” says a DCM banker away from the transaction. BTG Pactual and Deutsche Bank managed the sale, rated Baa2/BBB/BBB. The coupon was Brazil’s lowest ever, according to Dealogic data. It was the issuer’s first sale since BRL3.0bn 8.5% 2024 global real-denominated offering in April, through HSBC and Goldman Sachs, that was part of a tender offer.