Brazil’s National Treasury estimates that a new issuance of sustainable bonds on the international market must take place in late October and mid-November, although it has not yet made a decision, Valor has learned. The idea is to take advantage of the period before the market closes at the end of the year.

For experts interviewed by Valor, the Treasury’s release of a pre-issuance report in August signals that the launch may be imminent. The report is considered a prerequisite for starting the process. This document is important for investors to assess the sustainability of the issuance and the use of proceeds. Once this step is completed, the Treasury still needs to find a market “window” amid the recent volatility.

The Treasury has already issued two sustainable bonds on the international market. The first, in November 2023, Global 2031, offered 6.25% per year — at the time, the pre-allocation report had been released in October. The second, in June 2024, was Global 2032, with a rate of 6.125%, following the report’s release in May. The two issuances totaled $2 billion.

Porto Asset’s fixed income manager, Gustavo Okuyama, believes that the current situation does not seem ideal for new issuances, given the reduced risk appetite in the local market and the reduced participation of foreign investors. Still, he considers the move positive. “It’s always interesting for the Treasury to expand the range of benchmarks available to the market. This, in general, is well received. The only counterpoint would be, given the current scenario, whether the Treasury might find demand a little thinner than usual,” he said.

According to Mr. Okuyama, the share of non-residents holding public debt remains below the level at the beginning of the year, indicating that there has been no proportional increase in external demand for the issued bonds. In the domestic market, he sees signs of fatigue in risk absorption, following a series of large issuances. “I think this is very noticeable, especially with NTN-Bs [inflation-linked bonds].”

On the other hand, a market source, speaking on condition of anonymity, believes that the external and domestic markets do not necessarily connect. “For example, the local market may be weak while the external market may be performing well. What determines this is the appetite for the issuance in the external market itself,” he said.

The recent market trend is illustrated by the behavior of the ten-year Brazilian sovereign bond, whose annual yield peaked at 6.99% in April, rose again at times over the year, including in October, and fell back to 5.98% yesterday.

Part of this volatility reflects movements originating in the corporate market, according to another market source interviewed by Valor. Three Brazilian companies have recently faced episodes of stress in their bonds issued outside the country, either due to worsening risk perception or specific credit events. “These movements end up contaminating the sovereign bond, which is why we saw fluctuations at the beginning of the month,” the source said.

For Luís Felipe Vital, chief macro and public debt strategist at Warren Investimentos, the opening of a window of opportunity is linked to the market’s perception of the capacity to efficiently absorb the bonds. According to him, this window essentially depends on timing, which involves gauging investors’ appetite to purchase new securities under the desired conditions.

“In general, market participants understand that the Treasury seeks periods of greater demand for bonds, more favorable costs, lower volatility, and the absence of events or disclosures that could alter market sentiment throughout the issuance process,” Mr. Vital says.

This year, sustainable issuance gained special importance due to its integration into the context of the 2025 United Nations Climate Change Conference (COP30), which will be held in Belém, Pará State, in November.

The Treasury bond issuance may be one of the last by a Brazilian institution in 2025, a year in which fundraising volumes returned to the $30 billion level. At the end of November, after the Thanksgiving holiday in the US, a new funding window is expected.

“We’ll still have a window, but it [will be] calmer. Brazilian companies may issue, but I wouldn’t expect many transactions or significant volume,” said a banker who asked not to be identified.

The current window, which began in September, has been quite active, with fundraising from Petrobras, Suzano, Rede D’Or, Aegea, and Vamos. The Treasury itself raised approximately R$3.2 billion last month, with a new 30-year bond and the reopening of a five-year bond.

In recent weeks, investors in dollar-denominated debt have expressed concern about Ambipar’s corporate crisis and doubts surrounding the financial health of Braskem and Raízen, both frequent issuers.

According to bankers interviewed by Valor, foreigners’ appetite for Brazilian bonds remains strong, driven by the U.S. interest rate cut and the search for more profitable assets. Considering recent events, this appetite may be limited to higher-quality assets. In this context, a Treasury offering is unlikely to encounter resistance.