Brazil no longer the darling of Latam’s DCM markets

The Federative Republic of Brazil extended its recent run of lowering the cost of its international funds in September by selling $1.25 billion in 2023 bonds to yield 2.686% (US treasuries plus 110 basis points).

The deal, which attracted orders of more than $4.5 billion, demonstrates the country’s continued appeal for international investors despite recent disappointing economic data. But while high-grade paper from Brazil continues to sell – Vale and Petrobras sandwiched the sovereign with large international bond deals last month – high-yield corporates report that they are unable to tap international markets at attractive rates and are instead relying on the booming domestic market for debentures.

Brazil’s coupon on the Baa2/BBB/BBB transaction was an all-time low of 2.625%, according to Dealogic. The sales effort of lead managers BTG Pactual and Deutsche Bank was made easier by the increasing appeal of investment-grade countries within emerging markets and the fact that Brazil hadn’t issued 10-year bonds since 2010.

However, Andrew Janszky, partner and head of law firm Milbank’s Latin America practice, says that international market sentiment has turned against Brazilian issuers.

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