23 de febrero de 2015 / 15:33 / en 3 años

UPDATE 2-Uruguay opts for size in larger-than-expected bond tap

(Adds pricing details, quotes)

By Davide Scigliuzzo

NEW YORK, Feb 23 (IFR) - Uruguay picked size over tighter pricing Monday when it returned to the international bond markets with a larger-than-expected US$1.2bn reopening of its 2050 bond.

The deal marks the latest Latin American sovereign to take advantage of investor appetite for duration to raise long-term money ahead of possible rate hikes later this year.

The South American country, rated Baa2/BBB-/BBB-, increased the size of the deal by US$200m from the originally targeted US$1bn, but barely budged on pricing to come at a spread of 235bp over US Treasuries, essentially flat to initial talk of 235bp area.

At that level, the tap offered investors a 20bp concession over secondary market spreads on the existing notes, which on Friday were spotted at around 215bp over 30-year US Treasuries.

Despite the relatively generous premium, the sovereign likely faced some resistance from accounts who placed just over US$2bn in orders for the offering, said a banker away from the deal.

“They went for a larger size, but they increased only by US$200m and I am sure people were thinking it could end tighter,” said the banker. “They probably had some push back from investors.”

The sale, which priced at 101.394 to yield 5.014%, appeared to offer good value against regional peers.

Similarly rated Colombia (Baa2/BBB/BBB), for example, had its 2045 bonds trading at a spread of 210bp over Treasuries on Monday, while higher-rated Mexico (A3/BBB+/BBB+) had its 2046s quoted at around 183bp over, said the banker.

Because Uruguay’s curve is steeper than other sovereigns in Latin America, adding exposure at the long end might have been particularly beneficial for investors.

Panama (Baa2/BBB/BBB) has a much flatter curve, for instance. Like Uruguay, its 10-year was quoted at a spread of around 135bp, but its 2053 was trading at a much tighter 180bp versus the 235bp on Uruguay’s tap.

“The is still appetite for duration, and there aren’t a lot of options for people who want to stay clear of Brazil and energy names,” said a sovereign bond trader in New York, who argued the deal offered a good opportunity for investors to deploy cash.

Bank of America Merrill Lynch, Morgan Stanley and Santander were the bookrunners on Uruguay’s issue, which brought the total outstanding size on the 2050s to US$3.2bn.

Proceeds from the sale will be used for general budgetary purposes. (Reporting by Davide Scigliuzzo; Editing by Paul Kilby)

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