Friday, 6 February 2009

Yields in Brazil's Secondary Market for Corporate Bonds Are Surging, Helping Lure New Buyers

Yield increases for notes sold by Bradespar and Vale do Rio Doce are beginning to attract buyers. With Bradespar's 2013 notes trading at yields close to 9 percentage points above the benchmark inflation index (IPCA), or a 14 percent rate, private banks are being lured into these investments to offset losses suffered in the stock market (the Bovespa fell about 40 percent in the past 12 months.) According to Andima's, private banks and brokerages are starting to buy the notes from cash-strapped individual investors. But, hey! Institutional investors are starting to look for highly-rated paper, not simply the debt that offers the highest returns.

Among the notes that are being snapped up by investors is Sabesp's seven-year note issued in October, which has gained in price so much that yields dropped from 13 percent above the IPCA five months ago to less than 10 percent now. The Vale notes are now yielding almost 113 percent of the CDI (the benchmark interbank lending rate that is trading around 12.7 percent these days.)

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