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Costa Rica, Uruguay Return to Global Market as Yields Drop

Costa Rica and Uruguay tapped the international bond market for a second time this year on Monday, as they sought to take advantage of a drop in borrowing costs last week to raise a combined $2.2 billion.

Costa Rica placed $1.5 billion worth of 30.5-year bonds in a deal that was 3.4 times oversubscribed, the finance ministry said in a press release. The Central American country priced the 7.3% 2054 notes at 94.788 to yield 7.75% after opening the initial price talk in the very low 8% area and setting the guidance at 7.8%, plus or minus five basis points, according to a source involved in the deal.

Bank of America and JPMorgan were joint bookrunners on the bond sale, the source added. Costa Rica moved to lock in lower borrowing costs following a rally in US Treasuries last week that pushed down 10-year yields to their lowest level in five weeks on Friday amid growing expectations the Federal Reserve’s hiking cycle is over.

Additionally, Moody’s upgraded Costa Rica’s credit rating by one notch to B1 on Friday, citing the government’s efforts to steadily reduce its borrowing costs while increasing both the liquidity of and access to its debt. S&P raised the country’s debt to BB- from B+ last month.

“The improvements in the risk rating and compliance with the commitments with the International Monetary Fund, among other factors, allowed us to place our securities in favorable conditions,” said deputy finance minister Priscilla Zamora in the release. A source working on the deal said last month that Costa Rica was waiting for more favorable market conditions to price the notes.

The sovereign sold $1.5 billion worth of three-year notes in the international market in March.

Source: Latinfinance