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Jul 1, 2004

Brazil Pays Up
After a five-month absence from the markets, Brazil issued a $750 million five-year floating-rate bond in June, just nine days ahead of the Federal Reserve's Open Market Committee June 30 meeting, which investors widely expected would raise short-term US interest rates. Goldman Sachs and Merrill Lynch led the deal, priced at 575 basis points over Libor. Brazil had little choice but to sell medium-term floating rate debt, since investors shunned emerging market debt ahead of the Fed's June meeting. This was only Brazil's second issue of the year. The country issued a $1.5 billion, 30-year bond in January before borrowing costs surged.This is the first time in a decade that Brazil has issued a floater.

Brazil has a heavy amortization schedule this year. It had to pay down $822 million in foreign debt in June alone. The government has a further $5.4 billion in...

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“The crisis has been a setback for reserve diversification."

Jan Dehn, Ashmore Investment Management