Is it time to look outside of America for Income? Brazil Government Bonds are yielding over 9%.
Investors should consider International Bonds for the following reasons:
- The US Government politically seems to have less stability by the day.
- In this low rate environment, people are often seeking higher interest rates.
- It’s current wisdom that through proper diversification you can reduce risk.
- Many believe the US Dollar currency could decline in value due to government spending.
- Many other international debt issues have preformed far better than both the US Government and US Corporate debt.
Currently, we recommend that higher net worth individuals take a look at Brazil. Buy or get a quote here for International Government and Corporate bonds, including Brazil. Investors are often surprised at how easy it can be to buy/invest in foreign government and corporate securities.
Brazil Economy
Brazil, officially known as the Federate Republic of Brazil, is the largest country in South America. It is the fifth largest country by geographical area and the fifth most populous country in the world.
Brazil is the world’s eighth largest economy by nominal GDP (gross domestic product) and the ninth in the world by PPP (purchasing power parity). Economic reforms have given the country new international recognition.
Brazil has moderately free markets and an inward-oriented economy. It’s GDP surpasses $1.6 trillion, making it the eighth in the world and the second in the Americas (even ahead of Canada) in the World Bank ranking.
Judged by PPP, Brazil earns $1.9 trillion, making it the ninth largest economy in the world and the second largest in the Americas just behind the United States.
Brazil Government Debt
Brazil government bonds receive superb ratings (BAA3/BBB-).
Yield premiums for most nations’ debts are in the 9% range. For Brazil, Government debt is 6% higher than US Treasury debt for the same maturity.
The currency issues could, and will, affect future returns. Yet, with America debt exploding and the knowledge of many academic studies claiming to diversify a portion of your portfolio from US currency, risk could actually reduce for US citizens’ portfolios that have an over-abundance of their assets in US Dollars.
While working with other nations, some debt is more restrictive to US citizens than others, and Brazil has higher restrictions than some.
Brazil Government bonds maturing in 2016 are yielding around 9.%. Brazil’s Real is their underlying currency, which has been recently one of the stronger currencies worldwide.
On March 30, the indication for Brazil Government bonds ($250,000 face value, 12.50% coupon, maturing in 2016) was at 115.26 (9.03 yield) using a spot rate of 1.793. These levels are often fluid and are subject to change (and, have changed), but it allows you to see how much higher Brazil debt compares to other country debt. The Brazil currency, the Real, can and will affect the returns. We just can’t predict or insure that this currency will cause a positive or negative result.
Brazil Restrictions
- Must buy in US currency.
Buying in a single country does both increase your investment risk due to currency fluctuation and ownership of foreign debt, knowing that the volatility of each underling security is higher. But, if you properly build a diversified portfolio among several countries, utilizing government and corporate debt plus using the many currencies, the portfolio could actually reduce risk and add significant income. The following is our belief: United States income investors should protect a portion of their portfolio from the possibility of a devaluing dollar and current political instability. In doing this, they can often attain a much higher income and less overall portfolio risk. Even though, a large negative is that the individual sovereign security, affected by both currency and country economic condition, increases volatility. You might ask how can it be that more volatile individual securities reduce risk? This is because one would be adding the opposite of a crest and a trough to each other. Thus, in simple terms, they might just cancel out each other. Therefore, their entire portfolio might and often does have less total overall risk.
Currently, it is now our opinion that the future stability of the US Dollar is at the highest risk for increased volatility; higher than I’ve ever seen in my 25-year career. It’s due to the twin issues of overall US Government increases in spending, that makes a very large corresponding debt even larger, and then add this great increase in political instability that seems to be growing every day. These two titanic shifts will, in my opinion, greatly increase the underling volatility of the dollar and most probably in a negative way.
Brazil on the Positive Side
According to the World Economic Forum, Brazil was the top country in upward evolution in BRIC economies in 2009, gaining eight positions among other countries while overcoming Russia for the first time and partially closing the competition gap with India and China. Important steps taken toward fiscal sustainability since the 1990s, including measures taken to liberalize and open the economy, have significantly boosted the country’s competitive fundamentals allowing for more private-sector development, which is helping to expand it’s economy.
Brazil on the Negative Side
Ten Economic Freedoms of Brazil:
| 54.5 | Business Freedom | Avg 64.6 | 45.0 |
Investment Freedom | Avg 49.0 |
| 69.2 | Trade Freedom | Avg. 74.2 | 50.0 | Financial Freedom | Avg 48.5 |
| 68.4 | Fiscal Freedom | Avg. 75.4 | 50.0 | Property Rights | Avg 43.8 |
| 50.3 | Government Spending | Avg. 65.0 | 35.0 | Fdm. from Corruption | Avg 40.5 |
| 75.8 | Monetary Freedom | Avg. 70.6 | 57.5 | Labor Freedom | Avg 62.1 |
Brazil Statistics & Quick Facts
Population:
- 192.0 million
GDP (PPP):
- $2.0 trillion
- 5.1% growth
- 4.5% 5-year compound annual growth
- $10,296 per capita
Unemployment:
- 7.9%
Inflation (CPI):
- 5.7%
FDI Inflow:
- $45.1 billion
Brazil’s economic freedom score is 55.6, making it’s economy the 113th freest in the 2010 Index. It’s score is 1.1 points lower than last year as a result of declines in investment freedom and labor freedom. Brazil is ranked 21st out of 29 countries in the South and Central America/Caribbean region, and it’s overall score is below the regional and world averages.
Conclusion
Brazil’s dynamic growth, long term position as a major oil producer and their monetary management appear to tip the scale in favor of their socialistic tendencies; thus, helping the country have a higher degree of growth than most Latin American countries. An over 8% yield, or over 6 times the same comparable maturity in US debt, plus protection against a possible US decline in currency (but, at risk against a rising dollar) in this market appears doubly attractive for US investors.
Related Articles:
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Brazil Bond News:
- Pimco Favors Brazil, Mexico Bonds as Yields Overtake US Junk - Bloomberg
- Brazil's Petrobras Sells $11 Billion in Debt Bonds - OilPrice.com
- Brazil's BNDES Considering Selling Bonds Abroad, Coutinho Says - Bloomberg
- Brazil's BRF Raises $750 Million from Bond Issues to Refinance Debt - Fox Business
- Brazil's Petrobras Launches Sale of Bonds to Raise $11 Billion - Wall Street Journal (blog)
- UPDATE 3-Brazil raises $750 mln in global bond reopening - Reuters
- Brazil's Petrobras Confirms Plans for Multi-Tranche Bond Issue - Fox Business
- Brazil offers to sell global bonds due 2023 - Reuters
- As Investor Lean Towards EM Bonds, Brazil Takes Back Seat To Russia, China - Forbes
- Brazil to Sell 10-Year Dollar Bonds Overseas as Soon as Today - Bloomberg
- More...
Brazil Economy News:
- Brazil economy to grow less than 3% in 2013 - eNCA
- Research and Markets: Brazil's Economy to Witness Modest Growth to Reach ... - Fort Mills Times
- Brazil Central Bank Economic Activity Index Up 0.72% in March vs. Feb - NASDAQ
- Brazil's economy to grow 3 pct in 2013: central bank chief - Global Times
- In Brazil, Strong Labor Market, Weak Economy - Forbes
- Brazil's big government seen as good for politics, bad for economy - Yahoo! News
- Brazil Economists Forecast 2013 Growth Below 3% for First Time - Bloomberg
- Brazil's big-spending tourists take New York by storm - Financial Times (blog)
- More Gomselmash machines for Brazil - News of Belarus
- A Brazilian WTO chief could prove painful for the West - Telegraph.co.uk
- More...
Brazil Real News:
- Brazil's Real Weakens as Central Bank Refrains From Intervening - Bloomberg
- Brazil Real Ends Weaker - Wall Street Journal
- Brazil Real Ends Weaker as Doubts Remain on Fed Path - Wall Street Journal
- Brazil's Real Closes Weaker - Wall Street Journal
- Brazil's Real Weaker, Tracking Euro and Global Commodities - Wall Street Journal
- Brazil's Real Opens Weaker - Wall Street Journal
- Brazil Real Closes Weaker - Wall Street Journal
- RPT-EMERGING MARKETS-Mexico peso dips to 2-week low, Brazil real slips - Reuters
- Brazil's Real Opens Little Changed After Inflation Report - Wall Street Journal
- Brazil Real Advances on Speculation Central Bank Will Intervene - Bloomberg
- More...
Please provide details on purchasing Brazilian CDs including time terms, interest, issuing facility, transaction fees etc. Thanks JPB
Thank you. Actually, we can service Brazil and other foreign bonds but not foreign CDs. Would you like a current quote on the Brazil Bonds?
we have here a brazilian brady bond, with a certain number, issued in 1972 with face value of Cr$ 1.5 billion, actually face value is said to be R$ 34.5 billion appr., or in USD also a tremendous amount, its number of Central Bank of Brazil, SETIP number, Restructuration contract number. It has been updated to December 01, 2009, and the TLN is due to the year 2036.
What to do with this kind of paper? Id it worth a fortune or wortless, or somewhere in between.
Many thanks for answering,
kind regards
D. de Jong
>><<
Hello D.de Jong
Give me a call, (if you have a cusip it would save many steps) an we could find if they have value, I wish you good luck.
Randy
We have access to: BRAZIL 12/1/2016 112.500 9.531%
Do you have to buy a minimum amount of Brazil bonds?
Thanks
Ken
Hi Ken.
Thanks for the question. We do not have a minimum, but yes the Brazil Government requirement for Brazil bonds is quite high, it’s 250 bonds, and when you add in the currency it’s about $160,000. Current yield are about 9.5-10% depending on maturity:
……….. Coupon..Maturity..Price…..Yield…..Ratings……Cusip
BRAZIL 12 1/2 2016 112.200 9.572 Baa3 BBB- 105756BJ8
BRAZIL 12 1/2 2022 114.450 10.318 Baa3 BBB- 105756BL3
BRAZIL 10 1/4 2028 101.950 10.010 Baa3 BBB- 105756BN9
Bloomberg lists a 6-month zero-coupon Brazilian government bond currently yielding about 11%. Can I buy these through you? If so, please give the particulars.
If we can find them, Bloomberg has an identifier for anything listed…We need that to identify which bonds your looking for.
i understand the credit spreads of the Brazilian corporate bonds.
Howver, its sad to note that the investors have little appetite for the municipal bond market . could this be an anomaly of the meed for further credit enhancenent by the sovereign state and or the sub sovereign organ . surely, there are other methods to improve credit enhancement such as the senior debt beind placed with a huge investor and categorising the paper into mezzanine and junior debt. The first loss absorption is the security that the investor needs.
will wait for your comment
Raam Thanks for the question!
I’m sorry, but I’m having one of those days where things just aren’t working right for me, including my understanding of your comments.
CAN YOU PLEASE LET ME KNOW WHAT IS SELIK IN BRAZILIAN GOVERMENT BONDS?
I UNDERSTAND THE BRAZILIAN BONDS OR LTNS NEED TO BE ON “CETIP”, OR “SELIK” SYSTEM, WHAT THAT MEANS? AND ARE THESE DOCUMENTS GET IN THE US BY THE BUYER OR IN BRAZIL BY THE SELLER?
ARE THE BRAZILIAN BONDS SELLER HAVE TO HAVE THESE TWO DOUMENTS IN ORDER TO SELL?
THANK YOUR FOR YOUR TIME
ILMA R SILVA
My client asked me to find out for him. What are the procedures, or/ and the rules for a corporation to follow, if they are buying brazillian bonds. Can the company purchasing the bond hold your brazillian bonds in escrow, and make copies of your clients bonds? Can the platform purchasing my clients bonds collect copies of the bonds, then put into an escrow account, then promise to pay my client within 10 days?
i heard from another buyer that the platform must purchase the bonds first, and put the monies upfront, first before receiving anything. And i also heard the client that owns the brazillian bonds cannot make copies, nor deposit anything into the platform lawyers account for processing? i also heard that both the buyer and the seller must go to brazil, to complete this transaction in order for the seller to get paid? I need the brazillian gov purchasing procedures, if a platform is purchasing my clients bonds? and i need the rules of brazil , in the financial world there, that best describe the buyers and the sellers rules to follow please. I need these instructions as soon as you can. And I thank you for this time to learn how things are suppose to go with the buyer and the seller once the seller has announced he is ready to sell his brazillian bonds. Thanks Denise Faciane
Sirs:
I am a retired Canadian and do my own investing primarily in equities. I live in a motorhome year round,6 months in Canada and 6 months in the US. I have a business and properties in Canada and a US address and vehicle registration in Oregon. I do not have an American SSN nor any registration with the IRS.
I have always held a portion of my investments in the US and find it far more invigorating and exciting place to invest than in Canada. I would like to purchase bonds from Brazil which I find that you are advising your clients. Could you let me know if I am able to purchase these bonds through you, what changes to my profile would be required and if it is not possible could you advise me of any other way I could purchase Brazilian Bonds.
Thank you,
John Mitchell
Hello John
If your around Oregon come on by. I will be quite frank we would love to service you but with that said our custodians are the ones responsibility for holding the accounts. We would be more than will to try with the criteria you submitted if any of the firms we work with would allow it, honestly I don’t know for sure, but I believe we can knowing you have an Oregon address.
If you want us to go to the next step just give us a call.
Always putting your interests first.
To Denise and Ilam thanks for the questions but I don’t want to send you in the wrong direction with Brazil bonds, and I’m not sure of the questions you asking.
Not to put a dark cloud on your parade but we do millions of Brazil bonds and never seen either of the question you have raised. Since we work primarily with the US citizens we might not be the ones to ask. Sorry
Always putting your interests first.
What are CUSIP number of the bond suggested in thos web sire?
for example i’m interested in the BAC 10.5% brazilian bond, or the JPM russian bond
anyone knowns?
Hi Alex, Thanks for your question, I wasn’t sure which Brazil bond your were asking for so we gave both.
The Bank of American bond in Brazil is yield 12% is U0662KHW4
The Lloyd Bank bond yield over 10% is 5394E8AD1
JP Morgan 10% yield in Russin Rubels is U48065KT9
I hope this helps!
Always putting your interests first.
we are in need to purchase brazillian bonds anmd mexican bonds . any one with areal source and seller should pls not hesistate to reach me
obi_morex at yahoo dot com
skype: morex180181
Give us call we will try to walk your threw the many issues
Dear Sir,
I was willing to get more informsations on the Bonds bellow:
ISIN:US105756BL31 / CUSIP:105756BL3 / COMMON CODE: 026782660
I shall wait your return.
Sincerely yours,
Mr. Rodrigo Abilhoa