Chile on Thursday returned to international capital markets after a six-year hiatus, raising $1.52 billion in 10-year bonds to rebuild cities devastated by a massive February earthquake. The bonds, issued in dollars and pesos, were priced at the tight end of the guidance earlier given to investors, as demand for emerging market debt steadily increases.
Chile sold $1 billion in 10-year global bonds at a yield 3.89 percent, or 90 basis points more than comparable US Treasuries. The bond will carry a coupon of 3.875 percent. Chile also sold $520 million in 10-year peso-denominated bonds at par, with a yield of 5.5 percent. It was the first time the copper-exporting country issued an international bond in its own currency.
That marked "the start of the internationalisation of the peso," Larrain said. Demand was strong, according to government data, with the dollar-denominated issue 5.7 times oversubscribed. US investors grabbed 65 percent of the bonds, while European investors got 23 percent. The deal were managed by Citigroup, HSBC and J.P. Morgan. Chile's return to capital markets, from which it has been absent since 2004, also marks a change in the government debt strategy. Chile's bonds are rated A by Fitch Ratings, A-plus by Standard & Poor's, and Aa3 by Moody's Investors Service.
The fact that the supply of Chilean bonds is so limited has also enticed investors to pay more for the securities, at a moment when international liquidity is extremely high due to near-zero US interest rates. Brazil, which is rated at least four notches below Chile by ratings agencies, on Tuesday issued $750 million in 10-year bonds at a spread of 150 basis points over comparable Treasuries, considered very tight by investors.