The Republic of Chile drew robust interest across its two-tranche transaction including a tap of its 2.45% 2031 bond and a new 20-year social bond on Tuesday, garnering most of the interest on the new 20-year note.
The sovereign squeezed pricing to launch its 2.45% 2031 tap at a size of US$500m at Treasuries plus 75bp and US$1.5bn 20-year bond at Treasuries plus 115bp. Final books across both tranches were around US$5.3bn, according to sources close to the deal.
Most of the interest skewed toward the new 20-year bond, prompting leads to re-launch the transaction to sell more of the 20-year debt. Upon re-launching the deal, the 2031 tap was cut to US$300m and the 20-year was upsized to US$1.7bn.
"The demand was so robust [on the 20-year], the choice was made to allocate more to longer-dated debt," said a person close to the deal.
"The note is pricing off the 20-year benchmark, so you're not only getting a better spread but you're also getting a better all-in yield," he said.
Since the start of the year, sovereigns like Peru, Mexico, Colombia and now Chile have sold 20-year debt to robust investor demand.
Demand is also being attributed to the country's improving economic situation against the backdrop of a successful vaccine rollout.
The country's economic activity surged 6.4% in March compared to the same month in 2020, said the Chilean central bank earlier this week.
The social aspect to the new 20-year note boosted demand from ESG investors, market sources said. Proceeds will be used in accordance to the country's Sustainable Bond Framework.
This is the country's second social bond so far this year. In January, it sold a 40-year social bond as part of a two-tranche deal which also added US$750m to its outstanding 2.55% 2032 green bond.
Chile was last in the market at the end of March when it sold a US$1.5bn 32-year sustainability Formosa bond to robust demand at 2.3x oversubscribed.
Along with social projects, proceeds from the transaction are also expected to go toward general budgetary purposes.
Updated story: Adds commentary throughout