Bloomberg News

Brazil’s Credit Rating Raised One Level to Baa2 by Moody’s

June 20, 2011

(Adds credit-default swaps levels in the sixth paragraph.)

June 20 (Bloomberg) -- Brazil’s debt rating was raised one level by Moody’s Investors Service, which cited President Dilma Rousseff’s efforts to cut spending in Latin America’s biggest economy.

Moody’s lifted Brazil’s rating to Baa2, the second-lowest investment grade, from Baa3, the ratings company said in a statement. The outlook is positive.

Rousseff, who took office on Jan. 1, has pledged to reduce government spending by 50.7 billion reais ($32 billion) in a bid to cool the economy and restrain inflation. The economy will grow 4 percent this year after a 7.5 percent expansion in 2010 that was the fastest in more than two decades, according to the median estimate of 19 analysts in a Bloomberg survey. The rating increase follows an upgrade by Fitch Ratings in April. Standard & Poor’s boosted its outlook on Brazil’s rating to positive last month.

Moody’s in the statement cited a “willingness on the part of the government to reverse expansionary policies and adopt a conservative policy stance that appears more consistent with a sustainable growth path.”

The average yield investors demand to own Brazilian government dollar bonds instead of U.S. Treasuries narrowed eight basis points, or 0.08 percentage point, to 171 at 11:08 a.m. in New York, according to JPMorgan Chase & Co.

Default Swaps

The cost of protecting Brazilian bonds against default for five years rose three basis points to 118, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent if a government or company fails to adhere to its debt agreements.

The real was little changed at 1.5974 per dollar. It has gained 24 percent over the past two years, the best performance among Latin American currencies tracked by Bloomberg.

--Editors: Lester Pimentel, David Papadopoulos

To contact the reporters on this story: Tal Barak Harif in New York at tbarak@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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