Brazil prices its second sustainable issue

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Brazil returned to the international market on Wednesday to raise $2 billion in its first sale of sustainable bonds since its inaugural offering last November, market sources told LatinFinance.

The government priced the 6.125% seven-year notes at 98.510 to yield 6.375% after opening the deal earlier in the day at around 6.625%, the sources said. Bank of America, Goldman Sachs and HSBC as joint bookrunners on the Rule 144A/Reg S offering, according to the sources.

The government will use the proceeds to repay federal public debt and fund green and social investments, according to a source familiar with the deal.

Bruno Rovai, a sovereign strategist at Macquarie Asset Management, said the offering was well-timed “as market conditions are favorable for hard-currency issuance ahead of lower summer liquidity and following the benign stream of US economic data.”

However, he added, “we did not participate in the deal, as we believe the best opportunity in Brazil currently is on the local bonds side, especially after the recent repricing.”

Laszlo Lueska, a partner and portfolio manager at São Paulo-based investment firm Octante Capital, said demand for the bonds peaked at $4.6 billion before settling at $3.6 billion.

“As [initial price talk] came rich, demand started to build very quickly, even when Treasuries started to accelerate the widening movement,” Lueska said. “Demand came across all types of investors, but mainly real-money accounts and asset managers.”

Brazil also raised $2 billion in its sustainable bond debut last year. It went on to sell $4.5 billion worth of 10 and 20-year conventional sovereign bonds in January this year.