Brazil bonds

By Márcio G. P. Garcia, Lucas Maynard and Rafael Fonseca

The deterioration of the Brazilian economic situation in the last few months is quite impressive. Looking through a few of the recent economic indicators, the only ones that are pointing up are the ones that you would like to see going down: inflation, unemployment, delinquency rates, interest rate and public debt.

Despite an economic policy U-turn in the second Dilma Roussef´s government, represented by the substitution of the heterodox Finance Minister Guido Mantega by the University of Chicago-trained Joaquim Levy and by the Brazilian Central Bank’s much tougher monetary policy stance, the government has not been able to contain a deterioration in the expectations. The confidence indicators are at their lowest level in history, indicating that not only is the situation dire, but also there is no likelihood of it getting any better in the short term. Read more

What is this? Brazil is withdrawing $1.5bn from its sovereign wealth fund to plug a hole in its budget.

President Dilma Rousseff justified the move saying the sovereign wealth fund was the equivalent of saving for a rainy day – and that a rainy day had arrived. With Brazil’s economy not growing, the government is missing its budget targets. Read more

There is no doubt that emerging market (EM) investors have cheered up considerably of late. Following a torrid January and February, virtually all asset classes in the EM universe appear – on aggregate at least – to be gaining in value.

The bellwether stock index, the MSCI EM index, is up 9.6 per cent from its low on February 5. EM sovereign bonds are yielding an average of 5.51 per cent, down 0.37 per cent since January 1. Local currency bonds are, in many cases, producing stellar returns sharpened by windfall currency gains. Indeed, some EM currencies are among the world’s best performers, with the Indonesian rupiah rising 7.81 per cent, the Brazilian real gaining 7.3 per cent and the Indian rupee climbing 2.8 per cent so far this year. Read more

Now this was unexpected.

Brazil on Tuesday said it would scrap the 6 per cent IOF (financial operations tax) currently levied on foreign portfolio inflows into fixed income investments.

It’s a pretty drastic move. The country only raised the IOF on fixed income investments from 4 per cent to 6 per cent a little over two and a half years ago. Read more

By Pan Kwan Yuk and Samantha Pearson

UPDATE: It’s official. Petrobras has succeeded in raising $11bn on Monday, making it the biggest emerging markets issue EVER.

Final pricing came in slightly lower than initial guidance thanks to strong demand from investors. Yields for the six-tranche issue ranged from 2.14 per cent for the three-year notes, to 5.76 per cent for the 30-year bonds. The total size of the issue can still increase as underwriters has a so-called “greenshoe option” to sell 5 per cent more of the bonds to Asia investors. See original BB post after the jump. Read more

Brazilians may have been a little miffed last night when Fitch upgraded Mexico’s foreign-currency debt one notch above Brazil’s but they soon got their own back by launching their biggest bond sale this year.

After eight months since the last sale of government bonds, Brazil finally seized the opportunity on Thursday and launched a $750m reopening of its dollar-denominated global bond due in 2023. Read more

Investors’ attitudes towards Mexico have become unmistakably upbeat over the past year.

For proof, look no further than the latest Dealogic review of fundraising and dealmaking activities in Latin America. In the first three months of this year, Mexico has led the pack for both share sales and mergers and acquisitions – taking the crowns that previously belonged to Brazil. Read more

By Joe Leahy and Vivianne Rodrigues

After it saved the day last year for Brazil’s mournful initial public offering market by holding one of the country’s few successful listings, BTG Pactual is back with a bang in 2013 with the first major Latin American corporate bond issue. Read more

This week, Chart of the week looks at emerging market corporate debt. We’re cheating a bit because we have two charts: one showing issuance by non-financial corporates in 20 EMs since the beginning of 2007, and the other focusing on the five Brics nations.

But our real focus is on Brazil, the stand-out leader in corporate issuance. Read more

The markets on Thursday had barely digested news of Petrobras’ whopper bond sale than another appeared on the horizon.

On Thursday, cement company Votorantim Cimentos reopened its $750m, 7.25 per cent bond due April 4, 2041 with a $500m sale of more of the notes, becoming the latest in a series of Brazilian corporates that are cashing in on a rally in global markets. Read more