Brazil Real Rises as Investors Embrace 100-Year Petrobras Bonds

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Brazil’s real led Latin American currency gains a day after state-controlled Petroleo Brasileiro SA successfully returned to overseas capital markets with a $2.5 billion sale of 100-year notes.

Speculation that the worst is over for the company at the center of a kickback scandal that cost it billions in writedowns and a downgrade to junk made the nation more attractive as a destination for foreign investment. Finance Minister Joaquim Levy told reporters at an International Monetary Fund event in Washington on Monday that the offering is “good news” and may pave the way for other Brazilian companies to sell debt.

“The real’s uptrend can be explained by the relief on Petrobras,” Reginaldo Siaca, a foreign-exchange manager at TOV Corretora de Cambio in Sao Paulo, said in a telephone interview.

The currency rose for a second straight day, climbing 1.1 percent to 3.1323 per dollar at the end of trade in Sao Paulo, the best performance among seven major Latin American tenders tracked by Bloomberg.

The issuance was the first bond sale for the oil driller since the kickback scandal erupted last year. The company sold notes due in 2115 to yield 8.45 percent, 0.4 percentage point less than the initial price guidance from bankers. The offering attracted more than $7 billion of bids, according to a person familiar with the matter who asked not to be identified because the information isn’t public.

‘Surprise Effect’

“Investors are ready to leave the recent scandals behind and move forward,” Ipek Ozkardeskaya, an analyst at London Capital Group, said in an e-mailed response to questions. “On top of the company seeing a higher bid than one would expect, there is also the surprise effect which adds to the positive momentum for Brazilian assets.”

The real also gained as traders bet that policy makers will raise the target lending rate Wednesday to 13.75 percent from 13.25 percent. After four consecutive increases of a half-percentage point and a quarter-percentage-point boost, borrowing costs are the highest since January 2009.

The central bank extended the maturity of 7,000 foreign-exchange swap contracts worth $341.3 million Tuesday, compared with 8,100 daily last month. The sale of swaps supporting the real was halted in March.

Swap rates on the contract maturing in January 2017, a gauge of expectations for changes in borrowing costs, climbed 0.10 percentage point to 13.52 percent.

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