Weekly Report - 07 February 2019 (WR-19-05)

PARAGUAY | Bond issue. On 4 February Paraguay’s finance ministry (Hacienda) announced the issuance of US$500m in 31-year bonds in the international markets, with an interest rate of 5.4%. According to a finance ministry press release, two previous issues of 30-year bonds were at rates of 6.1% and 5.6% in 2014 and 2018 respectively, suggesting that market confidence in Paraguayan bonds is improving. The underwriters of the operation – Citibank, Goldman Sachs, and Morgan Stanley – priced the new notes with a coupon of 5.4%, or 234 basis points (bps) above US Treasury bonds, the lowest spread for any of Paraguay’s 30-year papers. Paraguay paid slightly more than Colombia, which issued US$1.5bn in 30-year bonds at 5.2%, but less than half than Ecuador, which sold US$1bn in 10-year notes at 10.75%. Hacienda noted that that the funds raised via the bonds are to be used to finance infrastructure projects (mostly road maintenance, the construction of social housing, and new prisons), capital expenditure, and to refinance a portion of Paraguay’s outstanding debt, in line with the approved 2019 national budget. According to the ministry, US$257m would be destined for infrastructure spending, US$200m to debt refinancing, and US$43m to capital spending.

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