• 5 hours UK On Track To Approve Construction of “Mini” Nuclear Reactors
  • 9 hours LNG Glut To Continue Into 2020s, IEA Says
  • 11 hours Oil Nears $52 With Record OPEC Deal Compliance
  • 14 hours Saudi Aramco CEO Affirms IPO On Track For H2 2018
  • 16 hours Canadia Ltd. Returns To Sudan For First Time Since Oil Price Crash
  • 17 hours Syrian Rebel Group Takes Over Oil Field From IS
  • 3 days PDVSA Booted From Caribbean Terminal Over Unpaid Bills
  • 3 days Russia Warns Ukraine Against Recovering Oil Off The Coast Of Crimea
  • 3 days Syrian Rebels Relinquish Control Of Major Gas Field
  • 3 days Schlumberger Warns Of Moderating Investment In North America
  • 3 days Oil Prices Set For Weekly Loss As Profit Taking Trumps Mideast Tensions
  • 3 days Energy Regulators Look To Guard Grid From Cyberattacks
  • 4 days Mexico Says OPEC Has Not Approached It For Deal Extension
  • 4 days New Video Game Targets Oil Infrastructure
  • 4 days Shell Restarts Bonny Light Exports
  • 4 days Russia’s Rosneft To Take Majority In Kurdish Oil Pipeline
  • 4 days Iraq Struggles To Replace Damaged Kirkuk Equipment As Output Falls
  • 4 days British Utility Companies Brace For Major Reforms
  • 4 days Montenegro A ‘Sweet Spot’ Of Untapped Oil, Gas In The Adriatic
  • 4 days Rosneft CEO: Rising U.S. Shale A Downside Risk To Oil Prices
  • 4 days Brazil Could Invite More Bids For Unsold Pre-Salt Oil Blocks
  • 5 days OPEC/Non-OPEC Seek Consensus On Deal Before Nov Summit
  • 5 days London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 5 days Rosneft Signs $400M Deal With Kurdistan
  • 5 days Kinder Morgan Warns About Trans Mountain Delays
  • 5 days India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 5 days Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 5 days Russia, Saudis Team Up To Boost Fracking Tech
  • 6 days Conflicting News Spurs Doubt On Aramco IPO
  • 6 days Exxon Starts Production At New Refinery In Texas
  • 6 days Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 6 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 6 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 7 days China To Take 5% Of Rosneft’s Output In New Deal
  • 7 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 7 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 7 days VW Fails To Secure Critical Commodity For EVs
  • 7 days Enbridge Pipeline Expansion Finally Approved
  • 7 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 7 days OPEC Oil Deal Compliance Falls To 86%
Alt Text

5 Big Gainers In Oil & Gas This Week

Energy stocks have been among…

Alt Text

Goldman’s Commodity Unit Sees Worst Q1 In A Decade

Investment bank Goldman Sachs saw…

Alt Text

Why Wall Street Is Bullish On Refiners

Wells Fargo has noted that…

Mad Hedge Fund Trader

Mad Hedge Fund Trader

John Thomas, The Mad Hedge Fund Trader is one of today's most successful Hedge Fund Managers and a 40 year veteran of the financial markets.…

More Info

The Seductive Allure of Brazilian Bonds

The Seductive Allure of Brazilian Bonds

OK, let’s say that if you don’t own bonds, but someone is holding a gun to your head, dangling you by your ankles outside a window on a high floor, or threatening to cut you off their Christmas card list, if you don’t buy some. Or worse, you offended you boss’s wife at the last office party, and as a result have been put in charge of running the firm’s bond fund. What do you do?

There is only one place on the planet I would consider owning bonds right now, and that is in Brazil. Local government one year debt, denominated in the Brazilian currency, the real, is yielding 11.3% . The real is appreciating against the dollar, offering investors a double leveraged effect that will deliver returns above and beyond the coupon. The one year maturity eliminates your duration risk. Inflation is under control at 4.7%. With GDP forecast to grow at 7% a year, the country has a long and merry series of credit upgrades to look forward to.

Capital is pouring in to take advantage of these lofty, double digit yields, with foreign investors snapping up over $5 billion of the $900 billion market this year. These bonds have become especially popular with investors in low yield countries, like Japan, where ten year bonds pay a parsimonious 0.90% a year (that’s no typo), and increasingly in the US.

Why are yields so high?  Brazil is still laboring under the weight of its own history, when many of these issuing entities defaulted during troubled times in the seventies and eighties. It turns out that Latin American generals aren’t very good at running countries or economies. There is also some concern that growth will become so white hot, that the government would be forced to raise rates to cool inflation, burning bond investors.

If you are a major hedge fund with a 24-hour trading desk in Rio de Janeiro, you will have no trouble picking up a position here, if you haven’t already done so. If not, you may have a problem finding paper, as these securities are not to be found in your standard online trading account. If anyone knows better, please let me know.

The only easy way in is through an international bond fund, like the (PCY), which I have been recommending for over a year, with stellar results (click here for the call). The problem here is that Brazil never accounts for more than 10% of these funds, and your gains are diluted by other positions you would rather not have, such as in Greece and Portugal. You could also learn the salsa, become fluent in Portuguese, and pick up a Brazilian girlfriend to get access to the local market. That strategy might offer other advantages as well.

By. Mad Hedge Fund Trader




Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News