Thursday, May 7, 2009

The Debts of the Lenders: Brazilian Bond Offering for "Quality Purposes"

The 2 month long market rally in equities and a somewhat belated decline in Western bonds (rising yields) has sparked interest among emerging market nations such as Brazil to return to the capital markets to fill their financing needs. Apparently, fixed income yield chasers tired or increasingly suspicious of US and British motives to endanger their currency and sovereign debt ratings are expressing an interest in emerging markets.

SAO PAULO (Dow Jones)--Brazil Thursday took advantage of its increasingly favorable status among investors by tapping the international debt market, but strictly for "quality purposes."

Thursday morning, the Brazilian Treasury announced the re-opening of its 2019 Global bond.

"The government is using this operation to add quality to its debt profile. In the past, Brazil accessed the market to roll over debt; now it is focusing strictly on quality issues," said Roberto Padovani, Latin America's chief strategist at WestLB bank.

The original bond was issued in January with a volume of $1.025 billion. The bond came with an interest coupon of 5.875% for an effective yield of 6.127%.

Deputy Treasury Secretary Paulo Valle explained Brazil's "quality" approach in an April interview with Dow Jones Newswires, saying the government was interested in a well-anchored yield curve for its overseas bonds. He said that would demand a total volume of at least $1.5 billion for the 2019 bond.

"Our strategy is focused on quality issues, to improve our debt profile," Valle added.


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