Brazil raised $4.5 billion in a two-part bond deal in the international markets on Monday that was roughly 2.7 times oversubscribed.
“This is the largest issuance of the past four years for Brazil,” said Bruno Rovai, sovereign strategist at Macquarie Asset Management.
Brazil sold $2.25 billion worth of 10-year bonds in one series and $2.25 billion worth of 20-year notes in the second, the Finance Ministry said in a press release.
Pablo Goldberg, head of research and portfolio manager for BlackRock’s emerging market debt team, said the amount raised in the deal exceeded what many analysts estimated as the total external funding needs of the country for the year, but added that Brazil has $6.7 billion of bonds maturing in 2025.
The new 6.125% 2034 bonds priced at 98.323 to yield 6.35%, or 225 basis points over the equivalent US Treasury bonds, after opening the initial price talk at around 6.625%. Meanwhile, the 7.125% 2054 notes priced at 99.707 to yield 7.15%, equal to a spread of 282 basis points over the same US Treasuries, after opening the deal at around 7.5%, the ministry added.
According to Rovai, the initial pricing for the 2054s looked attractive and managed to stay that way by the time the deal launched.
“The IPTs were quite wide compared to the bond curve,” he said of the pricing. “From our perspective, we find the Brazilian-USD curve to be rich on the front-end and belly, and less so on the long end.”
STRONG DEMAND
Investors placed as much as $12.3 billion in orders, split between $6 billion for the 2034s and $6.3 billion for the 2054s, according to Lazslo Lueska, a partner and portfolio manager at São Paulo-based investment firm Octante Capital.
“They wanted to issue $1.5 billion in each tranche, but as demand increased, the willingness of the treasury also increased, and they sent a message to investors that they were maybe going to issue $2 billion each tranche,” said Lueska.
“Initially they gave a very high initial price talks in yields. That’s good for investors, and that is why they found that huge demand,” he added.
Citi, Scotiabank and UBS were joint bookrunners on the bond sale, according to the Finance Ministry.
The Brazilian government plans to use the proceeds to pay off debt, it said in a prospectus filed with the US Securities and Exchange Commission.
Last week, Brazilian Treasury Secretary Rogério Ceron told LatinFinance that Brazil was planning to tap the international bond market more frequently this year in the wake of last November’s $2 billion sustainable bond issue. The country also sold $2.25 billion worth of 10-year notes in April last year in its return to the cross-border market after an almost two-year absence.