(Recasts to add details, background throughout)
By Guillermo Parra-Bernal and Paul Kilby
SAO PAULO/NEW YORK, March 7 The Brazilian
government sold $1 billion in a reopening of existing 10-year
debt on Tuesday at a record low yield, a sign of investor
optimism on the policy outlook for Latin America's largest
Brazil's National Treasury retapped the 6 percent,
dollar-denominated bond due in April 2026 at a price of 107.213
cents on the dollar to yield 5 percent, below initial guidance
in the "low 5 percent area." Investors placed $3 billion worth
of bids for the reopening, three people familiar with the
Demand for the notes came in stronger than initially
expected as orders from pension funds and other institutional
investors soared, allowing the Treasury to double the amount on
offer, one of the people said. The bond was first
sold in March 2016 at a yield of 6.125 percent.
Robust demand for the securities, coupled with investor
optimism over President Michel Temer's plans to overhaul
pension, labor and budget rules, allow policymakers to raise
fresh cash ahead of an expected increase in interest rates in
the United States.
Senior officials said Temer's policy agenda has helped
offset worries linked to U.S. President Donald Trump's vow to
curb trade. The cost of insuring against a Brazil bond default
for five years fell 1 basis point to 216 basis
points, according to IHS Markit Ltd prices.
"Brazil is really working on the fiscal deficit front, and
social security reform is a priority for the government right
now," said Klaus Spielkamp, head of fixed-income sales at
Bulltick Securities LLC in Miami.
In addition, Temer's early success in advancing part of his
economic agenda has paid off, and should help more local
corporate borrowers fetch bond market financing more easily in
Brazilian companies have until around late April to offer
debt in global markets using fourth-quarter financial data as
reference for their bond prospectus.
According to one of the people, Marfrig Global Foods SA,
Brazil's No. 2 meatpacker, is slated to price a senior unsecured
bond as early as Wednesday. Pulp and paper producer Suzano Papel
& Celulose SA could price a 30-year bond - the longest ever for
a Brazilian non-investment grade issuer, on Thursday, the same
"The timing of the sovereign retap was perfect to open a
window of opportunity for some domestic corporate issuers," said
the person, who asked for anonymity to speak freely about the
Brazil bond reopening.
The Treasury tapped the investment-banking units of Bank of
America Corp, Citigroup Inc and BNP Paribas SA
to handle the transaction.
The April 2026 bond traded at 108.77 cents on the dollar to
yield 4.796 percent ahead of the retapping. Tuesday's reopening
was the first time that Brazil tapped global debt capital
markets since a $1.5 billion sale of 30-year bonds in
The retapping took place in spite of news that Brazil's
economy had shrunk at a faster-than-expected pace last year, a
sign investors remain confident about Temer's ability to help
pull the country of a recession not seen since 1901.
(Additional reporting by Patricia Duarte and Bruno Federowski
in São Paulo; Editing by Cynthia Osterman and Diane Craft)