Brazil: Real bonds still flying despite Bradesco blip
Bank postpones R$500 million issue; Other banks and corporates persist
The wave of global Brazilian real-denominated bonds hit a blip last month after Banco Bradesco decided to postpone a R$500 million ($290 million) issue because of market volatility.
The bank was set to go ahead with the transaction but pulled out as concerns about the future of the eurozone and the regulatory problems facing Brazilian lender Banco Panamericano made for challenging issuing conditions. Panamericano is under investigation after its controlling shareholder was forced to borrow R$2.5 billion from the deposit guarantee fund to plug a shortfall in the bank’s capital. Local media report allegations that directors inflated assets to improve the bank’s books.
In contrast to Bradesco, its great rival Itaú went ahead with a global local-currency bond, raising R$500 million. It was the latest such bond issue following the sovereign’s global local-currency transaction in October. That was the first time in more than three years that the sovereign had issued in that format, when it tapped R$1 billion of its 2028 series at 10.25%.
Itaú’s global local-currency bond did get away
Many banks are reportedly looking to convince Brazilian corporates to issue global local-currency bonds to take advantage of the recent rise in the IOF transaction tax on domestic bond issuance involving foreign investment and the continuing high demand for emerging market debt.