Brazil Scores On Yield, Volume With Latest Market Tap

Brazil Scores On Yield, Volume With Latest Market Tap

Dow Jones

SAO PAULO -(Dow Jones)- Brazil on Thursday flaunted its increasingly favorable status among investors by scoring lower yields and increased volume in a reopening of its 2019 global bond.

After initially seeking $500 million, the Brazilian Treasury sold half again as much to eager investors. The $750 million bond tap came with a coupon rate of 5.875% and a yield of 5.8%, or 252 basis points over U.S. Treasurys.

By contrast, the original issue of the Global 2019 came with a yield of 6.127% , or 370 basis points over Treasurys.

Said one Sao Paulo market participant: “It was a perfect window of opportunity. U.S. Treasurys are near zero and appetite for Brazil is rising. The Brazilian Treasury scored a bull’s eye.”

Thursday evening, the treasury said it will offer the bonds overnight to Asian investors. The Asian offer could add $37.5 million to the total volume.

Barclays PLC (BCS) and Citigroup Inc. (C) were bookrunners on the deal.

Brazil was taking advantage of emerging-market risk premiums breaking new lows, with Thursday’s spread on JPMorgan’s Emerging Market Bond Index Global at 477 basis points over Treasurys by late afternoon. Brazil’s spread neared the end of the session at 308 basis points over Treasurys.

The spread was looking set to end the day at a new seven-month low following Wednesday’s close at 497 basis points over Treasurys. Emerging-market bonds have gained 12.08% so far this year, while Brazil’s debt has gained 2.49% in the same period.

Brazil’s $750 million reopening joins the $46.8 billion in sovereign and quasi-sovereign emerging-market debt issued so far this year, according to data compiled by ING Bank in New York. That compares to an issuance of $17.6 billion in the same period last year, ING said.

Books on the deal reached an astonishing $4 billion, with a little less than 200 investor accounts on them, sources familiar with the deal said.

The government is using this operation to add quality to its debt profile. In the past, Brazil accessed the market to roll over debt; now it is focusing strictly on quality issues,” said Roberto Padovani, Latin America’s chief strategist at WestLB bank.

Deputy Treasury Secretary Paulo Valle explained Brazil’s “quality” approach in an April interview with Dow Jones Newswires, saying the government was interested in a well-anchored yield curve for its overseas bonds. He said that would demand a total volume of at least $1.5 billion for the 2019 bond. The original issue in January totaled $1.025 billion.

“Our strategy is focused on quality issues, to improve our debt profile,” Valle added.

Thursday may be only the start.

The sovereign issue will also tend to open the debt market for local companies,” said Padovani.

Despite the government’s recent successes, local companies are still timid when it comes to debt placements. So far this year, only state-run oil company Petrobras (PBR), construction conglomerate Norberto Odebrecht and meatpacker JBS S.A. (JBSS3.BR) have accessed the market.

-By Rogerio Jelmayer and Claudia Assis, Dow Jones Newswires; 5511-2847-4521; rogerio.jelmayer@dowjones.com

(Tom Murphy in Sao Paulo contributed to this report.)

  (END) Dow Jones Newswires
  05-07-09 1735ET
  Copyright (c) 2009 Dow Jones & Company, Inc.

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