MercoPress. South Atlantic News Agency

Brazil sold 1.25bn dollar global bonds due in 2013 at lowest borrowing cost ever

Foreign investors are looking for emerging markets bonds hoping for better yields

Brazil on Wednesday sold 1.25 billion in dollar-denominated global bonds due in 2023, at the cheapest borrowing costs ever from foreign investors. High demand allowed the government to improve financing conditions by lowering the bond's yield spread over comparable US Treasury debt to 110 basis points from an initial 115 basis points.

The 10-year debt was priced at 99.456 cents on the dollar, with a coupon of 2.625% and a yield of 2.686%. The deal attracted 4.5 billion worth of bids from investors, more than four times the government's initial offer of 1 billion.

Both the coupon and the yield obtained in the operation are the lowest on record for a 10-year paper issued by Brazil. Similar 10-year dollar bonds in Mexico and Turkey currently yield 2.627% and 3.542%, respectively.

Brazil took advantage of growing expectations that central banks in the United States and Europe will further stimulate their sluggish economies by further pushing down their debt yields. Record-low rates in developed nations are prompting investors to seek higher-yielding assets in emerging-market nations.

With the sale, Brazil aims to improve financing terms for local corporate issuers by setting a new 10-year, dollar-denominated benchmark at a lower cost.

The bond sale also comes at a time when the government of Brazilian President Dilma Rousseff is trying to help local companies find private financing sources to build infrastructure projects seen as key to bolstering the world's sixth largest economy.

Aiming to spur long-term growth, Rousseff unveiled measures in August to lure 65 billion dollars in private investment capital to refurbish thousands of miles of decaying roads and railways in Latin America's largest economy.

Brazil spreads over US Treasuries, a measure of investors interest for the country's debt, currently stands at 174 basis points while Mexico is at 146 basis points and Russia at 186 basis points, according to JP Morgan's EMBI+ index.

Brazil last sold dollar-denominated, 10-year global debt in January, when it issued 825 million dollars worth of bonds after reopening an existing issue. At the time, the government secured a coupon of 4.875% and a yield of 3.449%.