Emerging Markets • 16.12.2009
Switch from 2016 to shorter-term bond
We recommend investors to switch out The yield to maturity of the 12.5% Brazil 2016
of 12.5% Brazil 2016 and into either is currently about 8.81%. With a central-bank
8.75% IBRD 2012 or 11.25% EIB 2013. rate of 8.75% and expectations of a hike from
the second quarter, we find the potential for
First of all, we would like to emphasise that further yield falls limited. As we see it,
we maintain our BUY recommendation for investors will therefore benefit from holding a
real-denominated bonds. Although shorter-term bond. We find the following two
disappointing GDP data were announced on alternatives attractive (they are also exempt
10 December, we still believe that Brazil will from the 2% tax):
be in a strong economic position and the
political risk in the country is low, which will 8.75% IBRD June 2012 (AAA).
support the currency in the years to come. Price: 99.40. Yield to maturity: 9.02%
Furthermore, Brazilian bonds pay an attractive 11.25% EIB February 2013 (AAA).
interest, considering the fact that the country Price: 104.8. Yield to maturity: 9.40%
enjoys an investment-grade rating with the
three large credit-rating agencies. Brazil’s For more details about the 11.25% EIB 2013
credit rating is expected to improve in coming bond, see here.
Jyske Markets In the event of a switch:
The key interest rate is now 8.75%. We assess
Vestergade 8 -16
DK - 8600 Silkeborg
that the Brazilian central bank will raise 12.50% Brazil January 2016 (BBB-).
interest rates in 2010. We expect hikes from Price: 117.00. Yield to maturity: 8.81%
Analyst: the second quarter. We expect hikes of approx.
Kent Bæk Iversen 2.00 percentage points next year, while
Comparison of the yield to maturity
+45 89 89 76 63 market prices discount hikes of approx. 3.00
KENT_IVERSEN@jyskeba percentage points. on our three real-denominated
If we prove right with respect to the central-
Translation: bank rate, market rates are likely to decline a 11
Translation Services 10.5
bit more. However, we find that the potential
Read more research
of the bond we preferred so far – 12.5% Brazil 9.5
reports on emerging- 2016 (B00687) - is exhausted. It has 9
market bonds at outperformed lately, since it is exempt from 8.5
www.jyskemarkets.com the new 2% tax and was the only alternative 8
August 2009 September October 2009 November 2009
for foreign investors. 2009
12.5% Brazil 2016 8.75 % IBRD 2012
11.25% EIB 2013
Please see the last page
Emerging Markets • 16.12.2009 • Jyske Markets
Disclaimer & Disclosure
Jyske Bank is supervised by the Danish Financial Supervisory Authority.
The research report is based on information which Jyske Bank finds reliable, but Jyske Bank does not assume any responsibility
for the correctness of the material nor any liability for transactions made on the basis of the information or the estimates of
the report. The estimates and recommendations of the research report may be changed without notice. The report is for the
personal use of Jyske Bank's customers and may not be copied.
This is a recommendation and not an in-depth investment report.
Conflicts of interest
Jyske Bank has prepared procedures to prevent conflicts of interest. These procedures have been incorporated in the business
procedures covering the research activities of Jyske Markets, a business unit of Jyske Bank.
Jyske Bank's emerging-market analysts may not hold positions in the instruments for which they independently prepare
research reports. Jyske Bank may, however, hold positions, have interests in or business relations with the instruments that
are analysed. The analysts receive no payment from persons interested in individual research reports.
Read more about Jyske bank's policy on conflicts of interest at www.jyskebank.dk/terms.
Risk associated with the bond
Investment in an emerging-market bond involves risk. Many factors, including the country’s credit quality, willingness to pay,
liquidity, social conditions and economic development may affect the price of the bond. Indirect factors may also affect the
price of the bond, for instance global economic factors, global risk tolerance and geopolitical risks. See the research report for
our view on the risk. The risk factors stated in the report should not be regarded as exhaustive.
If the bond is traded in a currency other than the investor’s base currency (this is often the case), the investor accepts an FX
risk. The FX risk is in many cases affected by the same factors as the bond (see above). We will assess the FX risk where we find
it necessary. The FX risk factors stated in the research report should not be regarded as exhaustive.
Update of regular research reports
We update EM Daily every day. We update EM Outlook every week. We update EM Recommendations at least once a week.
Our view of the individual countries will be updated on a regular basis in these publications. See the front page of the research
report for the date of the latest update.
Update of separate research reports
Separate reports are not updated. A new research report will be published when we find it necessary. This will often be the
case when there are significant changes which are relevant for investors. This includes changes in the recommendation, a
significant change of the risk associated with the bond or a significant change in FX risk. See the front page of the report for
the date when the research report was published. Separate recommendations are only published once.
All prices stated are the latest trading prices at the time of the release of the research report, unless otherwise stated.