Brazilian Treasuries? 10y Yield 12%

kmiklas · May 21, 2023

Any thoughts on Brazilian Treasuries?

10y is returning about 12%.

SnP rates them BB-, and they’ve defaulted 10 times in history: 1898, 1902, 1914, 1931, 1937, 1961, 1964, 1983, 1986 and 1990.

Yield curve follows.

Nice return… but too risky? It’s been 33 years…

Ref:
http://www.worldgovernmentbonds.com/country/brazil/

http://www.worldgovernmentbonds.com/country/brazil/

Gambitman · May 21, 2023

12% tells me it’s too risky. Didn’t realize they defaulted 10 times. Personally if I lent money to a friend 10 times and they never paid me back I probably wouldn’t lend the 11th.

kmiklas · May 21, 2023

Gambitman said:
12% tells me it’s too risky. Didn’t realize they defaulted 10 times. Personally if I lent money to a friend 10 times and they never paid me back I probably wouldn’t lend the 11th.

That was a long time ago.

traderwald · May 21, 2023

How do you the Brazilian treasuries that are mentioned above i.e. 10 Y with +12 yield ? i.e. does IB or Schwab provide it for trading or buying ? I was looking understand how to trade these on IB, but could not understand which symbol it was and the ones I opened were all USD denominated and gave single digit yiel on them.

zdreg · May 21, 2023

I use to hear the same questions about the Lebanese pound yielding 15%. It was a bad ending.

mervyn · May 21, 2023

People do trade those bonds, but they subsequently entered a PAS.

Specterx · May 21, 2023

kmiklas said:
Any thoughts on Brazilian Treasuries?

10y is returning about 12%.

Looks like 1yr notes and presumably shorter maturity bills are paying ~15%, so why on earth would you buy the bonds? If the central bank starts cutting and the yield curve un-inverts you can always shift into bonds at that time.

BRL has historically experienced regular depreciations vs the USD. If you invested in those 10yr bonds ten years ago you'd only get forty cents on the dollar back at maturity, not factoring in coupon payments - the USD value of which also shriveled over the ten-year period.

At a minimum you'd want to take a deep dive into inflation dynamics in Brazil, and prospective evolution of the government's fiscal and monetary policy.

kmiklas · May 22, 2023

traderwald said:
How do you the Brazilian treasuries that are mentioned above i.e. 10 Y with +12 yield ? i.e. does IB or Schwab provide it for trading or buying ? I was looking understand how to trade these on IB, but could not understand which symbol it was and the ones I opened were all USD denominated and gave single digit yiel on them.

Good question... I wondered that myself.

I was reading the FT on Saturday and this rate caught my eye.

I'm going to call IB about it today, and see if international bonds are available. I'll get back to you.

kmiklas · May 22, 2023

traderwald said:
How do you the Brazilian treasuries that are mentioned above i.e. 10 Y with +12 yield ? i.e. does IB or Schwab provide it for trading or buying ? I was looking understand how to trade these on IB, but could not understand which symbol it was and the ones I opened were all USD denominated and gave single digit yiel on them.

Looks like IB does offer Non-US bonds.

TWS (Desktop) -> Classic TWS -> Analyic Tools -> Bond Scanner -> Non-US Sovereign Bonds

Look at those fat yields!

Thanks, Keith
Non-professional -- not licensed -- opinion only

2rosy · May 22, 2023

ILF etf has 11.5% dividend and barely moves.