Picture
shows yields on (aprox) 5 year duration NTNBs (which I started to buy at 5.5% -
shit!). It is contrasted with the yield
of Brazil Sovereign Bonds (paid in US$) minus the US breakeven inflation
(Treasury vs TIPS), also 5 year duration. Both alternatives contain a premium for the Brazilian credit risk, although default in one does not imply in the other.
Scales in
the two axis have the same size, but different levels. NTNBs always paid more.
However, now that the real exchange rate seems fair, I don’t see any good
reason for it. Notice also that during the last 6 months the NTNB continue to
deteriorate but the sovereign stopped.
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