June 3, 2020 / 1:49 PM / a month ago

UPDATE 2-Brazil sells $3.5 bln debt in first dollar bond sale since 2019

(Adds bond sale details, quote)

By Jamie McGeever

BRASILIA, June 3 (Reuters) - Brazil waded into the international bond market on Wednesday for the first time since 2019, selling $3.5 billion of dollar-denominated debt in a heavily subscribed offer that suggests the worst of the recent market turmoil may be over.

The Treasury sold $1.25 billion of 5-year bonds at a rate of 3% and $2.25 billion of 10-year debt at a rate of 4%, which will be used to boost liquidity on the dollar curve and provide a benchmark for local corporates.

Earlier, IFR reported that the sale led by Bank of America, Deutsche Bank, Itau BBA and JP Morgan drew orders of $18 billion.

“The operation was a great success. We chose an extremely favorable window, demand was very strong,” said a Treasury source. “Even as we sold all this volume into the market, our bonds across the curve were rising, which is unusual. It was extremely positive.”

The last time Brazil borrowed on the dollar market was November 2019, when it sold $500 million of 10-year bonds and $2.5 billion of 30-year debt.

With the dollar weakening and U.S. bond yields around their lowest on record, against the backdrop of Brazil needing to finance its biggest budget deficit in history due to the coronavirus crisis, analysts said now is a good time to borrow on the international market.

“It makes sense, it is a good alternative to finance the increasing emergency expenditures,” said Carlos Kawall, director at Asa Bank in Sao Paulo and a former Treasury secretary. “Local markets are still expensive.”

Brazilian markets cheered the news as another sign that the worst of the volatility and huge asset sell-off since March may be over.

Brazil’s real surged nearly 3% to 5.08 per dollar, the spread between 10-year Brazilian and U.S. bond yields fell to a three-month low of 5.95% and the Bovespa stock market rose 2.2% to over 93,000 points. (Reporting by Jamie McGeever; Editing by Steve Orlofsky and Richard Pullin)

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