Paraguayan Sovereign Bonds: Yield, Risk, and Taxation 2026

Paraguayan sovereign debt is probably the most overlooked asset by French-speaking expatriates living in the country. The country regularly issues bonds, in dollars on international markets and in guaranis on the local market, with yields that are unparalleled in the eurozone and a credit profile that has recently changed categories.

Because this is the new development, and it has largely gone unnoticed on this side: Paraguay has crossed the threshold of investment grade. Moody's placed it there in July 2024, Standard and Poor's joined in December 2025, and Fitch maintains a positive outlook one notch below. Two investment-grade ratings are the threshold that most large institutional investors require before allocating any capital to a jurisdiction.

This guide describes what exists, what it yields, what risks it carries, and how it is taxed for a Paraguayan tax resident. It does not constitute investment advice: the cited yields fluctuate with the market, and any bond allocation should be discussed with a professional considering your situation.

Paraguay as a borrower: the fundamentals

Indicator	Situation
Sovereign rating	Moody's: Baa3, stable outlook, investment grade since July 2024 and confirmed annually since. Standard and Poor's: BBB-, stable outlook, since December 2025. Fitch: BB+, positive outlook since October 2025, one notch below the threshold, with a possible third investment grade rating to come.
Growth	5.8% in 2025, around 4.2 to 4.5% expected for 2026. The economy relies on agribusiness, primarily soybeans and beef, on hydropower from two large binational dams, and on cross-border trade.
Inflation	Around 4%, within the central bank's target band, which has been practicing inflation targeting since 2011. This monetary credibility is what makes a guarani bond investable.
Public debt	Approximately 36% of GDP according to data from the Ministry of Economy and Finance as of April 2026, after 41% at the end of 2025, with the decrease in the ratio mainly explained by an upward revision of nominal GDP. In absolute terms, debt is growing by about 12% per year, which led the Court of Auditors to warn about the trajectory. The level remains below the average for countries with comparable ratings, estimated at around 56%.
Fiscal framework	The 2013 Fiscal Responsibility Law caps the deficit at 1.5% of GDP. This ceiling has been exceeded for several consecutive years, with a convergence plan underway. This is the main point of vigilance highlighted by the agencies.
International reserves	Around 10 billion dollars, steadily growing, covering short-term external debt several times over.
Recognized weaknesses	Narrow tax revenue base, significant portion of debt denominated in foreign currencies, dependence on agricultural commodities and thus rainfall, and institutions whose strengthening remains a work in progress.

The honest summary: a solid borrower, with real but imperfect fiscal discipline, and a small, concentrated economy. The move to investment grade does not erase vulnerabilities; it reflects the fact that agencies now consider repayment capacity to be robust.

What Paraguay issues

International bonds in dollars

The Paraguayan Treasury issues several times a year on international markets, in dollars, under New York law, for amounts ranging from 500 million to one billion per operation, with maturities from ten to thirty years. These issuances are regularly oversubscribed.

Yields to maturity on the secondary market range, depending on maturity and current conditions, from approximately 5% for medium-term maturities to 6% or 7% for longer ones. The move to investment grade has mechanically narrowed the yield spread with US government bonds, which is good news for the issuer and less so for the late buyer: today's yield is lower than it was three years ago.

Access is through any international broker offering emerging market bonds. The minimum denomination is the first thing to check: some lines trade in increments of $1,000, while others are reserved for the institutional market with a minimum of $200,000. Liquidity is decent but not excellent, with a spread between bid and ask prices that represents a real transaction cost, often higher than the stated commission.

Treasury bills in guaranis

The Ministry of Economy and Finance issues Bonos del Tesoro in local currency, listed on the Asunción Stock Exchange, with maturities from one to twenty years. Yields range from approximately 8% to 12% depending on the duration.

Compared to inflation of around 4%, this gives a real yield of around 4% to 7%, which is considerable for sovereign debt of this quality. A European government bond today offers a real yield close to zero.

Access is through a casa de bolsa, a local brokerage firm approved by the Comisión Nacional de Valores. The minimum denomination is around ten million guaranis, or approximately 1,300 dollars, which remains accessible to individuals.

Short-term central bank securities

The central bank issues monetary regulation instruments from fourteen days to one year, in guaranis, to manage banking liquidity. They yield around 6% to 9% depending on maturity, with almost no credit risk and a short duration.

This is the local equivalent of a treasury placement, significantly more remunerative than a Paraguayan savings account. It is not a long-term investment: the real yield is modest, and the exposure is entirely concentrated on a single currency.

Local corporate bonds

Banks, agricultural cooperatives, exporters, and telecom operators also issue on the Asunción Stock Exchange, with yields of around 9% to 14% in guaranis, representing a premium of one to three points above sovereign debt.

This premium compensates for a different type of risk: a company can default, a sovereign state rarely does. Many local issuers are not rated by international agencies, which requires reading financial statements yourself. Liquidity is low. This segment only makes sense for an investor capable of conducting their own credit analysis.

Taxation for a Paraguayan resident

The guiding principle remains territoriality. What determines taxation is the location of the debtor, not the market of listing or the broker.

Security	Source	Treatment
Paraguayan Treasury international bonds, in dollars	Paraguayan. The issuer is the Paraguayan State, which neither foreign listing nor currency changes.	Interest taxable under personal income tax, income and capital gains category, at a rate of 8%. The net yield remains close to 5% to 6.5%.
Treasury bills and central bank securities in guaranis	Paraguayan, unequivocally.	Same 8% rate in principle. However, some public issues provide for preferential treatment in their documentation. This should be checked issue by issue with your casa de bolsa and your accountant, never assumed.
Paraguayan corporate bonds	Paraguayan.	Interest at 8%. No preferential treatment.
Bonds issued by foreign states or companies	Foreign.	0% in Paraguay by territoriality. US government bonds also benefit from an exemption from US withholding tax on interest for non-residents, resulting in zero on both sides.
Capital gains on disposal	Follows the location of the transaction.	Disposal on a foreign market: 0%. Disposal on the local market: taxable. Holding a local security until maturity generates no capital gain, only the repayment of the principal.

The practical consequence is clear. An international bond portfolio held from Paraguay is completely tax-exempt, while Paraguayan debt itself, in all its forms, is subject to 8% tax on interest. The local yield remains higher despite this difference, but it must be calculated net before comparing.

Three ways to build an allocation

The barbell

The logic is to position oneself at both ends of the risk-return spectrum, neglecting the middle. A majority portion, say half to two-thirds, in high-quality international dollar-denominated bonds, taxed at zero and perfectly liquid. A minority portion in local Paraguayan debt, better remunerated, taxed at 8%, less liquid.

The average return is higher than what a portfolio limited to developed countries would offer, without concentrating most of the capital on a single issuer or a single currency.

The ladder

Capital is spread across staggered maturities: one year, three years, five years, seven years, ten years. Each year, one line matures, the capital returns and is reinvested in the longest maturity on the ladder.

Two effects result from this. Interest rate risk largely disappears, as purchases are made at different times, and securities are held until maturity. And it generates a predictable annual repayment flow, making it the natural tool for a retiree settled in Paraguay who desires complementary income in local currency.

Natural hedge

If your income is in dollars but your current expenses are in guaranis, a portion of your guarani exposure is not a risk, it's a necessity. Rather than converting gradually, you can convert twelve to twenty-four months of expenses and place the surplus in short-term local securities.

The depreciation of the guarani, historically around 3% to 5% per year against the dollar, then reduces your dollar-measured return, but not your local purchasing power, since this money will be spent locally anyway. This is the only case where guarani exposure is justified without a currency bet.

And diversification through index funds

There are listed funds specializing in emerging sovereign debt, in dollars or local currencies, covering dozens of countries. They provide diversification that direct bond purchases do not allow, daily liquidity, management fees of around 0.2% to 0.5% per year, and zero Paraguayan taxation since the fund's issuer is foreign. On the other hand, Paraguay only accounts for a marginal fraction: one gives up the country's specific yield as well as its specific risk.

Risks, and what can be done about them

Risk	What it produces	How to contain it
Exchange rate	The primary risk of local debt. A 5% depreciation of the guarani reduces a 10% yield measured in dollars by the same amount. During a shock, severe drought, or collapse of agricultural prices, the movement can be more brutal and faster.	Cap guarani exposure to what you will actually spend locally. Do not convert coupons back to dollars.
Interest rate	When interest rates rise, the price of existing bonds falls, more sharply the longer the maturity.	Holding securities until maturity cancels this risk. A maturity ladder smooths it out. Maturities from one to seven years are much less sensitive than thirty years.
Sovereign credit	Low today, as evidenced by the investment-grade rating, but not zero. Paraguay has experienced periods of severe public finance strain in the past, with its rating falling very low around the turn of the 2000s. The current debt trajectory and exceeding the deficit ceiling warrant monitoring.	Do not concentrate more than a third or half of the bond portfolio on a single issuer. Monitor annual agency reviews, which are public.
Local liquidity	The Asunción Stock Exchange is small. Quickly exiting a large position comes at the cost of an unfavorable price spread.	Favor short-term maturities held until maturity, break down large purchases, and keep precautionary cash in short-term central bank securities.
Inflation	An inflationary slippage beyond the nominal yield would turn the real yield into a loss. The risk is low as long as targeting holds, but an food supply shock can revive it.	Diversify between guaranis and strong currencies. Follow the central bank's quarterly monetary policy reports.

How to access the market

For local debt, you need to open a securities account with an authorized casa de bolsa. The documents required are those for standard bank account opening: passport, cédula, proof of address, declaration of source of funds, and, if applicable, RUC. Allow one to two weeks, with no opening fees, as the company is remunerated through commissions. The entry ticket ranges from ten to fifty million guaranis depending on the institution and the target line. Paraguayan residency and opening a local bank account are de facto prerequisites for this entire process.

For international debt, an account with an international broker is sufficient. Paraguayan dollar bonds can be found by their ISIN code in the broker's bond selection tool, and settlement occurs two business days after the transaction. Before placing an order, systematically check three things: the minimum denomination, the spread between bid and ask prices, and the yield to maturity rather than just the stated coupon rate.

Conclusion

Paraguay has become an investment-grade borrower, recognized as such by two out of three agencies, with contained public debt, controlled inflation, and growth that is among the most consistent on the continent. Its debt still offers yields not found in Europe, around 5% to 7% in dollars and 8% to 12% in guaranis.

Taxation, meanwhile, sends a clear signal: interest on Paraguayan debt is subject to 8%, while interest on foreign debt held from Paraguay is not taxed at all. For a resident, the most efficient allocation therefore combines both: a tax-free and liquid international base, complemented by a local portion calibrated to your real needs in guaranis.

The principle that applies here as elsewhere remains: a single sovereign signature, no matter how highly rated, does not make a portfolio. Paraguayan debt is a good complementary asset for those living in the country, familiar with its currency, and spending there. It is not intended to bear the entirety of one's assets.

Are you preparing your tax relocation to Paraguay? Contact us: Paraguayan tax residency from €1,400, or €1,800 for the Express formula which can be completed in a single 2-day trip to the country, local bank account opening at €250, US LLC creation and DNIT accounting at €30 per month. Write to us on WhatsApp at +595 971 362 302: quick response, in French.