By comparison, Brazilian government debt of equal maturity was trading at 664 basis points above U.S. Treasuries on the day of issue. Governments, too, are having to jump through hoops to raise cash. The Brazilian government wants to sell long bonds. But investors are reluctant to take on long-term risk given the uncertainties over the economy. But if Brazil does well, you can have long-term paper.
Bond buyers have good reason to demand extra security.
An Argentine default would wreak heavy collateral damage on other Latin borrowers. Investors are desperately hoping the specter of default will just fade away. By stretching out the debt-service schedule, Argentine authorities are hoping to buy much needed breathing room. But even if Economy Minister Domingo Cavallo pulls off a successful swap, Argentina is not home free. Walter Molano, head of Latin American research at BCP Securities Inc. in Greenwich, Conn., believes the only reason hedge funds aren't shorting Argentine bonds is that they fear the paper will disappear as a result of the swap.