June 3, 2020 / 1:47 PM / a month ago

UPDATE 1-Brazil returns to international bond market for first time since 2019

(Adds detail, comment)

By Jamie McGeever

BRASILIA, June 3 (Reuters) - Brazil returned to the international bond market on Wednesday for the first time since 2019, offering 5-year and 10-year dollar bonds to boost liquidity on the dollar curve and provide a benchmark for local corporates, the Treasury said.

The global bond offerings, whose results will be announced later on Wednesday, will be led by Bank of America, Deutsche Bank, Itau BBA and JP Morgan, the Treasury said.

“The objective of the operation is to continue ... to promote liquidity of the sovereign yield curve in dollars, provide a benchmark for the corporate sector, and to meet maturing foreign currency debt,” Treasury said in a statement.

The last time Brazil borrowed on the international market was November 2019, when it sold $500 million of 10-year dollar-denominated bonds and $2.5 billion of 30-year debt.

With the dollar weakening and U.S. bond yields around their lowest on record, against the backdrop of Brazil needing to finance its biggest budget deficit in history due to the coronavirus crisis, analysts say now is a good time to borrow on the international market.

“It makes sense, it is a good alternative to finance the increasing emergency expenditures,” said Carlos Kawall, director at Asa Bank in Sao Paulo and a former Treasury secretary. “Local markets are still expensive.”

Brazilian markets cheered the news as a sign that the worst of the volatility and huge asset sell-off since March across emerging markets, particularly Brazil, may be over.

Brazil’s real extended its recent rally and surged nearly 3% to 5.06 per dollar, the 10-year Brazilian bond yield fell to a three-month low of 6.10% and the domestic interest rate curve flattened. (Reporting by Jamie McGeever Editing by Chizu Nomiyama and Steve Orlofsky)

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