Brazil Set for Longest Bond Drought on Record Amid Credit Woes

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Brazil is close to hitting its longest stretch ever without selling new bonds abroad.

The Treasury hasn’t sold new notes in international markets since its $1 billion issue of 2025 bonds in September 2014 as a deepening recession and a widening political crisis drove the nation’s credit rating to the cusp of junk. Brazil joins other developing nations such as Russia, which due to sanctions over its involvement in Ukrainian conflict hasn’t been able to access the international debt market since September 2013.

If the government doesn’t tap international markets by Sept. 23, it will break its record bond drought of 384 days ended in April 2003, when concern over the election of then-President Luiz Inacio Lula da Silva reduced foreigners’ appetite for new notes. Brazil bonds tumbled with the real this year as President Dilma Rousseff grapples with an anemic economy amid impeachment talks and a widening graft probe at the state-controlled oil producer.

“The Treasury has shown it’s waiting for favorable conditions to sell bonds in international markets,” said Bruno Rovai, Brazil economist at Barclays Plc in New York.

Brazil already has financing for all its debt this year and doesn’t need to tap foreign markets, the Treasury’s press office said in an e-mailed statement.

The $4.3 billion in notes due 2025, the country’s benchmark dollar bond, dropped 5.7 cents this year to 94.5 cents on the dollar. Yields advanced to 5 percent, compared with 4.2 percent at the end of last year.

The Treasury could announce a new issue should a borrowing-cost measure based on how much Brazilian dollar bonds yield over benchmarks, known as the Z-spread, fall to about 150 basis points from around 273 points, according to Rovai.

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