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Ye Xie and Veronica Navarro Espinosa /
Record investment in bonds is driving the yield premium to the lowest point since April compared to Brasil's credit-default swaps. Searching for higher returns with extremely low borrowing costs in the U.S. and Europe, investors have put $3.8 billion in Brasil bond funds this, reversing a $131 million net withdrawal in the year-earlier period. “Are we overvalued, or are we in a new era where emerging markets, including Brasil, can come of age?” said money manager Aaron Grehan. “That’s a big question. At absolute levels, these bonds do look stretched. But if this is a new normal, it is relevant. Lots of flows are coming in and you cannot underestimate it.”
