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Brazil raises $3 bi overseas with lower interest

Rates are near values when the country enjoyed investment grade rating

Published in 06/11/2019 - 16:02

By Wellton Máximo Brasília

The Brazilian National Treasury raised $3 billion from international investors with the lowest interest rates in seven years. The money came from Monday’s (Nov. 4) issuance of $2.5 billion in foreign debt bonds due in May 2029.

The rate from the issuance of 30-year bonds, due in 2050, stood at 4.914 percent a year—history’s second lowest interest for this kind of bond, surpassing only the issuance in November 2011 (4.694 percent a year). For ten-year bonds, due in 2029, the rate was 3.809 percent a year, also history’s second lowest, outweighing only the interest of 3.449 percent a year from the issuance in January 2012.

The move is the government’s attempt to borrow money from international investors, who will be given their money back with interest.

Slashing debt

Lower interest means the investors feel less wary about Brazil’s ability to pay the debt. With Brazil’s streak of downgrades, foreigners started charging higher interest in order to buy Brazilian bonds.

Brazil used the approximately $1 billion from the funds raised with the issuance of bonds due in 2015 to repurchase bonds circulating in the market. Taking these bonds, the Treasury reported, lowers the country’s indebtedness overseas.

Investment grade

Both interest and spread—the difference between the interest in Brazilian government bonds and that of US bonds—are very near their levels when Brazil enjoyed investment grade rating. Risk agencies deprived the country of this status between September 2015 and February 2016.

The operation attracted the interest of investors. The demand is reported to have tripled for bonds due in 2050 and multiplied by five for bonds due in 2029.

The funds collected abroad will be incorporated into the country’s international reserves on November 14. The bonds issued overseas do not aim to expand Brazil’s funds, but to provide a gauge for Brazilian firms planning to raise money in the international financial market.

Translation: Fabrício Ferreira Edition: Brasília

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