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By Natalie Harrison
NEW YORK, March 23 (IFR) - The Republic of Paraguay launched a bigger-than-expected US$600m 10-year bond on Wednesday, its first dollar offering in almost a year which will finance new investments and refinance existing debt.
Bank of America Merrill Lynch and Itau upsized the deal by US$100m and pulled in pricing by 37.5bp, launching the trade at a yield of 5% or tighter than initial price thoughts of 5.375%, a lead on the deal told IFR.
One investor that bought the bond put the new issue concession at 35-40bp, and said orders were in excess of US$3bn according to the latest details sent out to market participants by the leads.
The bond is expected to price later on Wednesday, a day after the leads began marketing through calls involving Finance Minister Santiago Pena and Central Bank Governor Carlos Fernandez Valdovinos.
Paraguay, rated Ba1/BB/BB, was last in the market in April 2015, when it tapped the 4.625% 2023s at a yield of 4.15% and reoffer price of 103.11 through bookrunners Bank of America Merrill Lynch and JP Morgan.
Those bonds have been trading with a dollar price of 101.00-102.00 or a yield of 4.45%-4.28%, according to Thomson Reuters data, or at a G-spread of around 270bp, according to the investor.
“The standard high-yield NIC has been coming at about 40bp, and this level is commensurate with that,” said Sean Newman, a senior portfolio manager at Invesco Fixed Income who oversees emerging market and government bonds.
“The story in Paraguay remains constructive. It has reasonable growth despite global volatility, and has prudent macro policy.”
The government had sought approval last year to raise up to US$740m in the foreign bond market in 2016 amid hopes that a boost to its credit ratings was on the cards.
Newman said the sovereign had no immediate need to come back to the bond market.
In the international markets, the US dollar remains the country’s currency of choice, partly because the government receives some US$700m in annual royalties from hydroelectric power plants, Finance Minister Pena told IFR in October. (Reporting by Natalie Harrison and John Balassi; Editing by Jack Doran and Marc Carnegie)