real-time news and commentary for investors
Wednesday, Aug 21
Backlash over bank profits in Brazil muni market
- Brazil's nascent municipal bond market is brought to a standstill as the government is unhappy with big profits collected by Credit Suisse (CS) and Bank of America (BAC) for underwriting deals.
- Credit Suisse loaned $1.27B to the state of Minas Gerais in February and then sold the debt to investors at a 9.2% markup. Bank of America made 3.6% by selling off a $662M loan to Maranahao last month.
- The government wants a piece of that action and is considering banning the securitization of new loans and a cap on interest rates.
- "These states paid a premium for their lack of experience in international markets,” says a bank fixed income trader. “Investment banks can justify that premium because they’re forming a secondary market for these where none existed before.”