Buyers flock to Brazil’s global issue

Brazil’s government has raised $825m in global debt markets at the lowest yield in the country’s history, putting its borrowing costs almost on a par with France as money pours out of crisis-hit Europe.

The Latin American country, once ridiculed for its hyperinflation and perpetual currency crises, sold $750m of its 2021 dollar-denominated bonds to European and US investors on Tuesday to yield 3.449 per cent. It sold a further $75m in Asia on Wednesday.

Solid economic growth of about 3 per cent last year, a rapidly expanding middle class, political stability and the prospect of further upgrades by rating agencies has made Brazilian debt desirable for investors including pension funds and banks.

The reopening of Brazil’s 4.875 per cent global bond, which was first sold in April last year, was about seven times subscribed on Tuesday, according to Itaú BBA, the Brazilian investment bank that co-led the sale with BNP Paribas.

People close to the operation said the original target was only $500m, but the order book had to be closed after $2bn was offered in the first 30 minutes.

The final order book after Wednesday’s Asia sale totalled $4bn, they said.

At 3.45 per cent, the record-low yield now also puts Brazil in a better position than some eurozone countries, which must contend with higher borrowing costs as fears of a “double-dip” recession compound the region’s debt crisis.

Government bonds of a similar maturity are now yielding around 6.9 per cent in Italy and 5.2 per cent in Spain. “Brazil has fairly stable political dynamics and a hugely improving economic outlook. It also has a credible monetary policy, unlike other emerging markets, say, Turkey,” said David Spegel, head of emerging markets strategy at ING in New York.

The country also compares favourably to Mexico, which tapped global debt markets on Tuesday, the first trading day of the year, issuing $2bn of 10-year bonds. The securities delivered a slightly higher yield of 3.705 per cent.