Greenspan Conundrum Is Lula's Gain as Long-Term Yields Sink

The biggest foreign purchases of Brazilian local bonds in three years are pushing longer-term borrowing costs below yields on two-year debt for the first time since October 2008.
Yields on fixed-rate government bonds due in 2017 have declined 106 basis points, or 1.06 percentage points, in the past three months to 11.49 percent. The plunge in 2017 yields put them as much as eight basis points below yields on notes maturing in 2012 last week. A year ago, longer bonds yielded 171 basis points more than the shorter-term securities.

Record low yields in the U.S. and Europe spurred foreigners to buy a net $16 billion of Brazilian bonds from January through July, compared with $9.1 billion for all of 2009, according to the central bank. International investors are piling into longer-term debt, helping trim President Luiz Inacio Lula da Silva’s borrowing costs, in part as a bet slowing inflation will push down rates in coming years, according to Citigroup Inc.

“We are seeing relentless inflows,” Dirk Willer, head of Latin America local markets strategy at Citigroup in New York, said in a telephone interview. “Some of the investors are betting on the convergence trade.”

Brazil Interest Rate Futures Drop to 11-Month Low on Global Growth Concern

Yields on Brazil’s interest-rate futures contracts declined to an 11-month low on speculation slowing global economic growth may prompt Central Bank President Henrique Meirelles to stop raising interest rates.

The yield on the contract due in January 2012 fell two basis points, or 0.02 percentage point, to 11.13 percent, the lowest level since September, at 9:22 a.m. New York time. At 10.69 percent, the contracts due in January 2011 imply the central bank may keep its benchmark borrowing costs at 10.75 percent for the remaining three policy meetings this year.

Itau Sees Brazil GDP Growing 7.5% ‘Chinese-Like’ Pace in 2010

Itau Sees Brazil GDP Growing 7.5% ‘Chinese-Like’ Pace in 2010
May 12 (Bloomberg) -- Brazil’s economy will grow at a faster, “Chinese-like rate” this year as a result of a stronger global economy and measures taken to stimulate domestic demand, Itau Unibanco Holding SA said.

Latin America’s biggest economy should expand 7.5 percent this year, above a previous estimate for 6.5 percent,

Brazil Boosts BNDES Lending Capacity by $20.7 Billion

April 30 (Bloomberg) -- Brazil’s state development bank will have an additional 36 billion reais ($20.7 billion) to lend under a plan announced by the Treasury today.
Brazil’s Treasury will exchange 1.3 billion reais of shares it owns in Centrais Eletricas Brasileiras SA, a state-controlled power utility, for shares in state-controlled Banco do Brasil SA owned by development bank known as BNDES, said Charles Guedes, a Treasury official. The Treasury will also transfer to the bank a credit of 2.7 billion reais owed to it by Eletrobras, as Latin America’s biggest utility is known.
The two measures will boost capital levels at the development bank, giving it more room to make loans. BNDES can include the Eletrobras shares as part of its capital, while rules didn’t allow shares in Banco do Brasil to be counted as capital.

Brazil Trades A-Rated as Growth Makes Debt Safer

April 30 (Bloomberg) -- Brazil’s credit rating, raised to investment grade two years ago, is poised to increase as the economy grows at the fastest pace since 2007, trading in credit- default swaps shows. The cost to protect Brazil bonds, ranked BBB- by Standard & Poor’s, from default for five years fell seven basis points this month to 123 basis points, or 1.23 percentage points, according to data compiled by CMA DataVision. In Europe, where Greece’s spreading debt crisis led to downgrades this week, swaps on Portugal almost doubled this month to 2.78 points, even though its debt is rated A-, three levels higher than Brazil.

Eletrobras May Swap $2.7 Billion of Debt for Shares

April 29 (Bloomberg) -- Centrais Eletricas Brasileiras SA, Latin America’s largest utility, is seeking to convert 4.7 billion reais ($2.7 billion) of liabilities to the Brazil’s government into shares, the finance chief said.

Rates Rise As Brazil Sells BRL408M Inflation-Indexed NTN-Bs - WSJ.com

RIO DE JANEIRO (Dow Jones)--The Brazilian Treasury sold 408 million Brazilian reals ($231 million) worth of inflation-indexed NTN-B bonds at an auction Tuesday, with interest rates rising on emerging-market volatility and expectations for higher local interest rates.
The government sold slightly more than 80% of the BRL500 million worth of bonds on offer Tuesday. The bonds came in three maturities between 2013 and 2020.
The government sold the bonds at average interest rates ranging from 6.50% to 6.75%.