Sometimes emerging-market sovereigns retire higher-yielding Brady bonds when they issue lower-yielding globals. Sometimes, they issue higher-yielding global bonds even when they have access to lower-cost funding from the official sector in an attempt to diversify their funding base. Never, until now, has a country retired higher-yielding official-sector debt as part of a lower-yielding bond issue.
| Finance minister Eyzaguirre: a borrowing strategy tied into dollar earnings from copper |
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The whole point of funding from multilateral development banks, after all, is that it is extended at concessionary rates in return for preferred-creditor status and the country's accession to an IMF plan.
But in April Chile found itself in the enviable and thus far unique position of being able to retire $600 million of World Bank debt yielding between 7% and 8% by issuing a five-year global bond yielding just 5.695%. It would have been the lowest-yielding bond in emerging-market history if it hadn't been for the fact that on the same day Chile also issued a three-year ¤300 million note with a yield of just 5.31%.