Brazil is expected to issue its first bond of the year next week, when many bankers are predicting it will issue a solid benchmark dollar deal.
Although rumours circulated this week that Brazil might begin 2006's overseas funding with a global deal in reais of five or seven years, some heads of Latin American debt capital markets (DCM) in New York thought it would do much better to bring a clean, simple dollar benchmark at 10 or 30 years.
"The Turkey and Philippines deals show there is tremendous demand at the long end for dollars and Brazil would do well to take advantage of such a strong time in the market with either a new 2016 or 2036 global," said one coverage banker.
"We think Brazil should develop a yield curve in the global markets in reais and a five or seven year real global makes good sense — but as its second deal of the year, not its first," added another Latin American DCM banker.
Brazil issued its first global real deal in September, a $1.5bn equivalent 10 year issue. That deal showed issuing local currency bonds can be difficult and unpredictable, something analysts say that the sovereign would not want to begin the new year with.
"It also doesn't make sense to come with a very short term issue at a time when demand for long dated debt is so strong, even if it would be a strategic building out of its curve in reais," added a Brazilian coverage banker.
The new year has sparked another surge of Latin bond buying, which pushed Brazil's benchmark 2040 dollar bond up to an all time high of 130.00 this week.
Brazil's 2034s now yield just 7.5% and its 2015s 6.75%.
"Following the solid end to 2005, it is somewhat surprising how strongly emerging markets... have performed so far in 2006," said Barclays Capital in a daily report this week.
Although emerging market spreads are beginning the year at near record tight levels, the impressive performance of the asset class last year, compared with other markets, has kept demand fresh.