Brady Bond

Brady Bond

A bond issued by the International Bank for Reconstruction and Development to Latin American countries starting in 1989 and continuing into the 1990s. It effectively refinanced the bonds issued by Latin American countries after many defaulted on their national debt in the 1980s. Many bonds issued in the region prior to this were illiquid; Brady bonds were tradable and, for that reason, were more attractive to investors. Because many of them were guaranteed by U.S. Treasury bonds, they also carried less risk. In 1999, Ecuador defaulted on its Brady bonds. However, in 2003, Mexico retired its Brady bond debt completely.

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Brady bond. These bonds of Latin American countries, named for former US Secretary of the Treasury Nicholas Brady, are issued in US dollars and backed by US Treasury zero coupon bonds.

The bonds were originally issued in exchange for commercial bank loans that were in default. Their changing prices in the secondary market reflect the level of confidence investors have in the economies of the issuing nations.