Brazil Treasury Secretary: Overseas Bond Likely In December - WSJ.com

Brazil Treasury Secretary: Overseas Bond Likely In December

SAO PAULO (Dow Jones)--Brazil's government likely will issue another overseas bond before the end of the year, Treasury Secretary Arno Augustin said Friday.

'We are looking to build a better yield curve and improve the quality of our debt management,' Augustin said in a telephone interview.

He said the bond likely would be denominated in U.S. dollars and carry a 10-year term. He said it was possible the government would reopen its 2019 bond. He didn't offer any idea about the size of the offer.

Augustin said the government was also studying a possible overseas bond denominated in the Brazilian real. 'This is on our agenda,' he said. 'However, it is not likely for the short term since rates for dollar-denominated bonds are so good right now. A real-denominated issue is possible in 2010.'

Brazil has accessed the international debt market four times this year. In January, Brazil issued $1.025 billion in global bonds due in 2019. The bonds were sold at a yield of 6.127%. In May, it reopened the operation, raising another $750 million at a yield of 5.8%.

In July, the treasury obtained $525 million from the issue of an overseas bond due in 2037, with a yield of 6.45%. At the end of September, it raised $1.27 billion with the issue of a global bond due 2041, with a yield of 5.8%.

In the September operation, the government took advantage of a sovereign upgrade by Moody's, tapping the international bond market to fill out its debt curve.

In September, Moody's Investors Service raised Brazil's sovereign credit rating to Baa3, an investment-grade rating, more than a year after Standard & Poor's and Fitch Rating did so.

Brazil has issued real-denominated bonds overseas before, most recently in May 2008. At that time, it raised 750 million Brazilian reals ($441 million) from the reopening of an existing 2028 bond.

'Given the current international environment of low interest rates, Brazil's government will continue its policy of repurchasing overseas debt,' Augustin said.

In 2008, Brazil repurchased overseas bonds with total face value of $1.2 billion.

'We would like to buy more, but investors seem like they want to hold on to their Brazilian paper,' Augustin said.

The treasury secretary said Brazil's government will release its annual domestic debt management plan at the beginning of 2010. 'I can already tell you at least one thing about the plan,' Augustin said. 'We will aim to reduce the debt-to-GDP ratio next year.'

The debt-to-GDP ratio was 44.8% as of Oct. 31, up from 36.0% at the end of 2008. Brazil's public sector debt rose this year because of the global recession, which caused a decline in tax revenue.

But Brazil's economy is expected to rebound in 2010. Most economists are expecting growth of 5% next year after an expansion of no more than 1% for 2009.

Regarding Brazil's volatile foreign exchange market, Augustin said, 'We are closely monitoring the exchange rate, and we will be ready to correct any distortions.'

The Brazilian real has gained about 35% against the U.S. dollar so far in 2009, causing worries for exporters.

Augustin said Brazil's government will continue its policy of systematic purchases of U.S. dollars in order to build foreign reserves. 'This policy will continue, managed by the central bank,' he said.

Brazil's reserves stood at $238 billion at the end of November, up $5 billion from the previous month.

-By Rogerio Jelmayer, Dow Jones Newswires; 55-11-2847-4519; brazil@dowjones.com"