BBVA supports Brazil in its return to the euro bond market

Against a backdrop of geopolitical uncertainty, the transaction also reflected an increasingly relevant dynamic among major sovereign issuers: accessing international markets not only to raise funding, but also to reinforce credit positioning among global investors and preserve access to different sources of liquidity. The issuance, structured in three tranches (4, 7 and 10 years), raised €5 billion and marked Brazil’s return to this market since 2014 . “Unlike other sovereign issuers, Brazil does not access international markets out of funding necessity,” explains Agustina Ramírez, Head of BBVA CIB Brazil . “The objective was to reestablish its Eurocurve, strengthen relationships with European investors and send a signal of solid access to global markets.” The context had also changed significantly over the past decade. The investor base was now more selective, more sensitive to the geopolitical backdrop and far more demanding in terms of execution and pricing. The challenge was not only to return, but to do so with credibility. A mandate won on execution The very structure of the mandate gave the transaction particular significance. The Brazilian Treasury opted for a best efforts structure, with no commercial constraints. In practice, the selection of the bookrunners was based exclusively on technical criteria: execution capabilities, investor access and market insight. “In the institutional sovereign segment, this type of mandate carries significant value because it recognises the bank’s ability to interpret the market and execute complex transactions,” says Ramírez . "In the institutional sovereign segment, this type of mandate carries significant value because it recognises the bank’s ability to interpret the market and execute complex transactions" Brazil’s return to the euro market also required each stage of the process to be calibrated with precision: from the initial credit positioning to the launch timing and investor engagement strategy. “The key was finding the right balance between pricing, narrative and timing,” explains Ramírez . “There was uncertainty around the depth of European demand and around what the appropriate entry point should be in a highly volatile environment.” In this regard, BBVA’s role throughout the coordination process between the origination, execution and global distribution teams stood out , in an end-to-end process that required constant monitoring of the market and investor sentiment throughout the placement. The transaction was launched with initial price thoughts built on several factors including sovereign comparables and cross-references to dollar curves. As the placement progressed, demand enabled levels to be progressively tightened, with the order book ultimately exceeding €16 billion. But the real test came after pricing. The very stable performance of the bonds in the secondary market confirmed that pricing had successfully balanced the issuer’s objectives with investor expectations, a decisive test in a transaction of this visibility. Europe gains ground Brazil’s return to the euro market also points to a broader trend in international funding . Although the US dollar remains the primary currency for Latin American issuers, the euro market is gaining relevance as a complementary source of liquidity and diversification. “We are seeing growing interest from Brazilian issuers in accessing the European market,” says Ramírez . “The existence of a solid sovereign benchmark also paves the way for future corporate and institutional issuances.” "We are seeing growing interest from Brazilian issuers in accessing the European market" The transaction therefore leaves behind a benchmark that extends beyond the sovereign itself. The reopening of the Brazilian sovereign euro curve helps facilitate access to the European market for Brazilian corporate and institutional issuers by reinforcing the sovereign benchmark in this currency and increasing the visibility of Brazil risk among international investors. For BBVA, the mandate also reinforces its positioning in a segment where global presence, local expertise and execution capabilities are increasingly important differentiators. In a more selective and sophisticated market, transactions such as Brazil’s also test institutions’ ability to interpret market conditions and execute with precision.