Peru keeps fundraising focus on local currency

Peru keeps fundraising focus on local currency

Bonds Debt Capital Markets Corporate & Sovereign Strategy Economy & Policy Fixed Income Peru Andean

Peru plans to have around 70% of its debt in local currency in the medium term, up from 63% today, said José Olivares, the head of financial markets at the Ministry of Economy and Finance (MEF).

"We will remain focused on 'solarization'," Olivares told LatinFinance. "But we will also refresh the global yield curve to take advantage of low rates and keep growing our investor base."

Peru got record-low yields on $2.5bn in new bonds on June 13, selling PEN5.83bn ($1.75bn) in sol-denominated 2034 notes at 5.4% and $750m in dollar-denominated 2030 notes at 2.84%, Olivares said.

The bookrunners HSBC, Morgan Stanley, Santander and Scotiabank opened the initial price talk on the 15-year, sol-denominated notes at 5.625%. The spread came down as orders went above PEN20bn.

"I was surprised that the investors asked for even more bonds in soles," Olivares said. Peru paid a new issue premium of 2bp, he added.

On the dollar deal, the initial price talk started at 3.08%. Orders topped $4bn, and the 11-year notes priced at 75bp over US Treasury bonds, equal to a negative new issue premium of 14bp, Olivares said.

A source familiar with the deal said he had not seen yields this low from a Latin American issuer at least in the last 10 years.

"International accounts don't have many chances to buy dollar-denominated bonds from Peru, but they like the credit," the source said.

International investors bought 87% of the sol-denominated notes, when they usually acquire roughly half of local-currency global notes from Latin America, the source said. "Investors are willing to take on Peru's local currency bonds because they are more liquid," he added.

Peru priced PEN10.4bn in 10-year Euroclearable bonds to yield 5.95% in December last year. The country last sold $1.25bn in 12-year dollar bonds to yield 4.125% in August 2015.

The MEF will use some of the money from the latest deal to buy back bonds that come due between 2023 and 2037, including all PEN4.11bn of its 5.2% 2023s as well as $406m in dollar-denominated bonds and €4.3m ($4.82m) in euro-denominated bonds.

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