Brazil’s government doesn’t need to sell bonds denominated in dollars “at any cost” because it has already met 80 percent of its external financing needs for 2010, Deputy Treasury Secretary Paulo Valle said.
“We already have dollars,” Valle said in an interview during a LatinFinance conference in London today. “We don’t need to issue at any cost.”
Brazil’s government needs about $7 billion in external financing per year and already has met 80 percent of that, Valle said. Latin America’s largest economy has about $250 billion of international reserves, he said. European markets have become more “volatile” since the Treasury last sold bonds in April and the government can wait for a “more adequate moment” to sell, he said.
Brazil canceled the sale of its longest fixed-rate local bonds three times in the past month after Europe’s debt crisis eroded demand for less-traded assets. The government yesterday cancelled a sale of local notes due in 2021 after receiving no bids it found acceptable.
“The yield premium over the past two weeks was out of place with the rest of the Brazilian curve because of market volatility,” Valle said. “The 2021 point had a dispersion and a distorted rate, so we thought it best not to sell.”
Bonds in Euros
Brazil sold a total of $787.5 million of global bonds due in 2021 in U.S., European and Asian markets in April, tapping overseas debt markets for the first time this year. Finance Minister Guido Mantega said foreign investors were reassured by strong, sustainable growth and inflation that’s converging to the government-set target.
The treasury is seeking to create “benchmarks” of 10-year and 30-year dollar bonds with “good liquidity, ” Valle said today. The country will start issuing dollar bonds again when market conditions improve, he said.
Brazil’s government hasn’t ruled out selling bonds in euros and will wait for “better market conditions” before doing so, Valle said.
“We would only issue in the euro market if it made sense with our strategy of creating a well-defined curve and liquidity,” he said. “Our objective is to have a medium- to long-term strategy, not simply an opportunist issuance.”