The National Treasury announced the result of the operation in the US market that included the issuance of a new 7-year benchmark, called GLOBAL 2031 ESG.

The GLOBAL 2031 ESG matures on March 18, 2031 and was issued in the amount of US$ 2.0 billion, with a rate of return for investors of 6.50% p.a., which corresponds to a spread of 181.9 basis points above the reference Treasury (US Treasury bond), the lowest level in new issues in almost a decade. The sustainable bond has an interest coupon of 6.25% p.a., which will be paid on March 18 and September 18 of each year. The issue was made at a price of 98.572% of its face value.

Represents a new milestone in the management of the Federal Public Debt by reaffirming the Republic’s commitment to sustainable policies, converging with the growing interest of non-resident investors, and with the expansion of the thematic bond market in the world.

Following the announcement of the Brazilian Framework for Sustainable Sovereign Bonds, drawn up by the Committee on Sustainable Sovereign Finance (CFSS) with the support of the Inter-American Development Bank (IDB) and the World Bank, the National Treasury is continuing to implement its strategy, committing to allocate the equivalent amount of the funds raised to actions that boost sustainability and contribute to climate change mitigation, the conservation of natural resources and social development.

With regard to the time frame of the allocation of resources, the indicative composition is that at least 75% should be dedicated to financing new expenditure and a maximum of 25% to refinancing expenditure that has already been carried out or is in progress. In order to provide transparency on the allocation categories considered, Brazil presented, in the pre-issuance report, an indicative list of categories that can be considered for green and social spending.

The issue reinforces the important role of external debt in terms of lengthening maturities, diversifying indexes and the investor base. In addition, it corroborates the role of the external Federal Public Debt in providing a benchmark for the corporate sector, which is why the National Treasury chose a 7-year benchmark, where private issues are concentrated.

The National Treasury’s first sustainable bond issue attracted significant interest from investors, which can be measured by the more than 240 orders at the peak of the order book. Demand far exceeded the volume issued, with the order book nearing US$ 6.0 billion. The final allocation saw significant participation from non-resident investors, with around 75% coming from Europe and North America, with Latin America, including Brazil, accounting for 25%. The issue was mostly absorbed by long-term investors, with asset managers acquiring around 60% of the bonds, and there was significant demand from ESG accounts, participants in the non-deal road show held in Brazil at the beginning of September 2023.

The operation was led by Itaú, J.P. Morgan and Santander. Financial settlement will take place on November 20, 2023.