September 1, 2005
The Brazilian Treasury marked the end of an era in emerging markets in August, when it replaced 80% of its C-bonds with a new bond named the A-bond. For many years, the C-bond (or Front Loaded Interest Reduction with Capitalization Series L Bond) was the most liquid emerging-market bond and the benchmark for the asset class.
But Brazil wanted to rid itself of the stigma attached to the so-called Brady bonds, issued as part of the debt restructurings orchestrated in the early 1990s by former US Treasury Secretary Nicholas Brady. In a deal last month led by JP Morgan and CSFB, Brazil eliminated the biggest Brady bond of all and saved itself some money as well.
Brazil exchanged its benchmark Brady C-bond with a new, improved bond called the A-bond, thanks to some clever liability management.