Brasilia: Brazil is selling this month the lowest amount of local bonds since May as a tax increase on foreign investors and speculation the central bank will raise interest rates next year erode demand for the securities.
The government has sold 19.5 billion reais (Dh41 billion) worth of bonds in November, including 5.1 billion reais in yesterday's auction, after issuing 38.2 billion reais worth of securities in October. It sold 13.4 billion reais of debt in May, when Europe's growing debt crisis drove up yields in emerging markets.
Yields on benchmark government bonds due in 2021 surged to a six-month high of 12.77 per cent this week after President Luiz Inacio Lula da Silva tripled a tax on foreigners' debt purchases to 6 per cent last month to slow investment and stem a currency rally.
Yield jump
The yield has jumped 54 basis points since the first of two increases of the so-called IOF tax on October 4, almost double the 29-basis-point increase in yields on similar-maturity Mexican peso bonds over that time.
"All they've managed to do is just make the cost of financing more expensive," Edwin Gutierrez, who helps manage $6 billion in emerging-market debt at Aberdeen Management Plc in London, including Brazilian local debt.
