Brazil raises $2,25 bi overseas following higher interest
Brazil’s National Treasury raised $2.25 billion from international investors following an increase in interest from previous bond issues. The money stems from Tuesday’s (Jun. 29) launch of $1.5 billion in foreign debt bonds due in September 2031 and $750 million in foreign debt bonds due in January 2050.
The rate from 10-year bond issues, due in 2031, added up to 3.875 percent a year, compared to 3.45 percent the last time this kind of bond was released, in December last year.
For 30-year bonds, the rate reached 4.925 percent a year. In the latest issue, also in December, interest had amounted to 4.5 percent a year.
The higher interest comes chiefly from a gain in bonds from the US treasury, which escalated in 2021 as the US economy started recovering from the COVID-19 pandemic. Since the final rate hinges on the return from US bonds, considered the world’s safest, and a risk premium, the interest for Brazilian bonds also surged.
Low interest rates indicate little suspicion from investors that Brazil will not be able to pay the debt. In periods of economic crisis such as the present, foreigners started charging higher interest in order to buy Brazilian bonds.
By launching foreign debt bonds, the government borrows money from international investors with the commitment of returning the funds with interest. This means that Brazil will return the money several years from now corrected for interest—3.875 percent a year for bonds due in ten years and 4.925 percent a year for bonds due in 30 years.
According to the country’s National Treasury, the main goal of issuing bonds abroad is not strengthening foreign currency in the country, but provide a gauge for Brazilian companies intending to raise funds in the international financial market.
