Brazil LM shows rising cost of funds
The sovereign’s debt swap follows deals from other LatAm governments with a one-day execution – and underscores how much borrowing costs have risen
Latin American issuers are facing higher borrowing costs,
despite the US Federal Reserve continuing its quantitative easing program. Brazil, in
selling $3.2 billion in new 2025 bonds Wednesday, has shown just how much
costs for some have already risen.
The sovereign priced the
new 2025 at a 4.305% yield, equal to US Treasuries plus 180 basis points. In
September of last year, Brazil sold a $1.25 billion 2023
bond at 2.686%, or a 110 basis point spread. In a reopening
of those 2023s in May, Brazil paid a tighter spread than in September, 98
basis points, but a higher yield of 2.750%.
In this week’s transaction, done to buy back eight
off-the-run bonds in a one-day liability management deal, both the absolute
yield and spread have increased sharply, with just a two-year extension to the
Colombia, another recent Latin American sovereign issuer,
also experienced an increase in funding costs. Last month, it priced a $1.6
billion 2024 bond at a 4.168%
yield, or 142 basis point spread. That price compares to the 2.178% yield and
88 basis point spread seen on a $1
billion 2023 in January.
Brazilian protein company JBS joined the sovereign in the
market Wednesday, raising
$1 billion in its largest international sale to date. Corporacion Andina de
Fomento (CAF) raised
$200 million through a private placement.
On tap for the remainder of the
week were Chilean Entel and
Nacional de Costa Rica. Guatemala’s
Cementos Progreso was expected next week. LF