Brazil and Mexico, Latin America’s largest countries, sold the year’s first emerging-market bonds overseas, selling at record-low yields as borrowing costs tumble.
Brazil’s government sold $750 million more of its 4.875 percent notes due 2021 to yield 3.449 percent, while Mexico issued $2 billion of 10-year bonds to yield 3.706 percent, according to data compiled by Bloomberg. Brazil paid 150 basis points more than similar-maturity U.S. Treasuries while Mexico sold at a yield gap of 175 basis points.
Demand for the Brazilian bonds surpassed $3.5 billion, said Surat Maheshwari, head of international syndications at Itau BBA USA Securities in New York. Investors sought more than $5 billion worth of the Mexican debt, the country’s Finance Ministry said in a statement.
“It was a very good outcome that shows what the Brazil story is about and how much investors like it,” Maheshwari, who helped manage the sale, said in a telephone interview.
Yields on Mexican government debt fell (JPSYGMEX) to a record low 4.38 percent on Dec. 27, according to data compiled by JPMorgan Chase & Co. Average Brazilian borrowing costs reached a record low 4.37 percent on Dec. 13.
“The cost of financing obtained in this sale is the lowest the government has obtained for this maturity,” Mexico’s Finance Ministry said in the statement. “That demonstrates the confidence investors have in the administration’s economic policies.”
Brazil’s bonds returned 13.8 percent last year, the most since 2006, according to the EMBI Global index. Emerging-market bonds with investment-grade ratings gained 9.9 percent, with Colombia and Mexico returning more than 14 percent in 2011.
Brazil’s government sold $1.7 billion of dollar-denominated bonds last year, including $550 million of notes due in 2021 and $1.1 billion maturing in 2041. In a Dec. 15 research report, Bank of America Corp. forecast Brazil will sell $2.3 billion in foreign debt in 2012 to roll over securities coming due. JPMorgan said in a Nov. 23 report it expects $2 billion.
Standard & Poor’s raised Brazil’s credit rating one level to BBB, the second-lowest investment grade, in November, following a similar move by Moody’s Investors Service and Fitch Ratings. S&P said the country’s “cautious fiscal and monetary policies” help it cushion the impact of the global economic slowdown. Mexico is also rated BBB by S&P.
Paribas SA and Itau managed the Brazilian government’s bond sale, while Deutsche Bank AG and Morgan Stanley managed Mexico’s. Brazil originally marketed $500 million more of its 2021 bonds.
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