Paraguay Aims Below 5%

Paraguay has given 5.00%-area yield guidance for a 10-year $500m bond debut expected to price as soon as today, according to investors following the transaction. Books exceeded $1.2bn 30 minutes after announcement Wednesday morning, and the sovereign has indicated the $500m size will not grow. The issuer’s international bond debut is being compared to Bolivia’s (Ba3/BB minus) 2022 bond sold last year. Bolivia, too, started at 5% levels before tightening to price at 4.875%, and now trades in the 4.75%-4.80% area. “Paraguay seems cheap relative to Bolivia, so I would expect a strong book and hence decent performance,” says a New York based EM sovereign investor following the deal. “Fair value would be at 5% and above, but this deal may be priced too aggressively, like Bolivia. In both cases, upside is fairly limited,” adds another buysider looking at the transaction. In a report, Barclays spots fair value at 4.85%-5.00%. Bank of America Merrill Lynch and Citi are managing the sale, rated Ba3/ BB minus/BB minus.