July 21, 2016 / 2:12 PM / 2 years ago

UPDATE 3-Brazil yield sinks in sale of $1.5 bln, 30-year bond

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By Guillermo Parra-Bernal and Alonso Soto

SAO PAULO/BRASILIA, July 21 (Reuters) - The Brazilian government sold $1.5 billion in 30-year bonds on Thursday at a yield well below market expectations, signaling growing investor optimism on the outlook for Latin America’s largest economy.

The National Treasury sold the securities, which mature in February 2047, at a price of 96.464 cents on the dollar to yield 5.875 percent, below expectations of yields in the “very low 6 percent” area. A person familiar with the deal said investors placed $6 billion worth of bids for the securities, which bear a an annual coupon rate of 5.625 percent.

The Treasury hired the investment-banking units of Deutsche Bank AG, Goldman Sachs Group Inc and HSBC Holdings Plc to manage the transaction. Yields on the country’s 30-year bond that comes due in 2045 are currently trading around 5.73 percent.

Policymaking proposals by interim President Michel Temer to cut spending and curb debt growth are luring investors back into the nation’s debt. The deal also benefited from renewed demand for higher-yielding emerging market assets as a global economic slowdown pushes borrowing costs closer to zero.

According to Credit Suisse Group AG’s SBI Brazil index, a gauge of relative borrowing costs for Brazilian sovereign bonds, the country’s debt spread has narrowed to about 1.8 percentage points over comparable U.S. debt this month from about 2.4 points in March.

Two government officials who were directly involved in the transaction told Reuters earlier in the day that a successful placement of the 30-year bonds could encourage local corporate borrowers to return to international debt markets after a relatively long hiatus.

The government last tapped international bond markets in March, when it sold $1.5 billion in bonds maturing in 2026 at a yield of 6.125 percent. (Additional reporting by Paul Kilby in New York and Patricia Duarte in São Paulo; Editing by Bill Trott and Alan Crosby)

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