Brazil issued $3.5 billion of government bonds in exchange for cash and old debt securities, offering the country’s longest maturity in its first dollar-denominated offering this year.
The country issued the bonds due in 2045 to yield 5.131 percent per year, the Treasury said in a statement today. The country raised about $1.5 billion of new cash, according to a person familiar with the offering who asked not be identified because the details haven’t yet been made public. The country also swapped new bonds for outstanding securities with maturities ranging from 2024 to 2041, according to the statement.
Brazil tapped the bond market a week after Fed Chair Janet Yellen reiterated in congressional testimony that U.S. borrowing costs will probably stay low for a “considerable period,” making emerging-market assets more attractive. The Latin American country sold 1 billion euros ($1.3 billion) of seven-year bonds in March to yield 2.961 percent just three days after Standard & Poor’s lowered Brazil’s credit rating by one step to the lowest level of investment grade.
“The timing for the offering can be considered ideal,” Siobhan Morden, the head of Latin America strategy at Jefferies Group LLC in New York, said in a telephone interview. “There is still appetite for emerging-markets assets and for a credit name like Brazil.”
Brazil’s dollar bonds yield an average 2.05 percentage points more than U.S. Treasuries, compared with 2.30 percentage points at the end of 2013, according to index data from JPMorgan Chase & Co.
The sale may be extended to Asian investors by as much as $50 million, and the final result of the operation will be anounced once the sale in Asia is over, the Treasury said.
A press officer at Brazil’s Finance Ministry did not reply to phone call or an e-mail seeking details on the transaction.
The Latin American country last sold dollar bonds in October, when it issued $3.2 billion of securities maturing in 2025 to finance overseas buybacks.
Among Brazilian issuers that issued dollar bonds this month are state-controlled bank Caixa Economica Federal, which sold $500 million of bonds maturing in 2024, and pulp producer Klabin Finance SA, which sold the same amount of 10-year notes.
“The objective of the operation is to improve the curve of the sovereign debt in dollars,” the Treasury said in the statement. Bank of America Corp., Deutsche Bank AG and Banco Itau BBA SA will coordinate the sale, the Treasury said.
The latest bond offering comes as President Dilma Rousseff is facing a combination of stalled growth and above-target inflation as the October election approaches.
Analysts cut their growth estimate for an eighth consecutive week, forecasting a 0.97 percent expansion of gross domestic product following a 2.5 percent increase in 2013, according to the median of about 100 estimates in a central bank survey published July 21.
Policy makers held the target lending rate at 11 percent for a second straight meeting on July 16 after nine consecutive increases to curb accelerating inflation.
S&P lowered Brazil by one step on March 24 to BBB-, citing the nation’s sluggish economic growth and Rousseff’s expansionary fiscal policies.