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Thursday, February 08, 2007

Brazil Selling Reais-Denominated Bonds

Another interesting insight into the global liquidity situation, Brazil is able to sell 1.5 billion reais of 21-year local currency denominated bonds in international markets:

Brazil sold 1.5 billion reais ($717 million) of 21-year bonds in international markets, the government's longest local-currency, fixed-rate maturity ever.

The Treasury sold the bonds, which mature in January 2028, to yield 10.68 percent.

Today's sale is part of the government's effort to shift more of its debt into local currency securities and to lengthen the maturities on those bonds. Issuing bonds denominated in reais allows Brazil, the biggest debtor among developing nations, to protect against a sudden rise in borrowing costs should its currency weaken.

``With a Brazilian real issue the government relies less on U.S. dollar financing and becomes less sensitive'' to swings in the currency, said Jean-Dominique Butikofer, who helps manage about $725 million of emerging-markets debt at Union Bancaire Privee in Zurich.

Brazil first sold real-denominated debt in September 2005, when it issued $1.5 billion worth of bonds due in 2016. In September, it sold $750 million of local currency debt due in 2022. Strong demand for the securities led the Treasury to sell more of those bonds twice: in October, with the sale of $300 million of the bonds, and again in December, with the sale of $350 million.

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