Brazil's Real Gains as Fannie, Freddie Takeover Spurs Demand

By Lester Pimentel

Sept. 8 (Bloomberg) -- Brazil's real gained the most in almost three weeks as the U.S. government's takeover of mortgage finance companies Fannie Mae and Freddie Mac triggered demand for high-yielding assets.

The real strengthened 0.8 percent, the most since Aug. 19, to 1.7027 per dollar at 9:10 a.m. in New York, from 1.7160. The currency is rebounding from its biggest weekly decline in 5 1/2 years.

``There's been an abrupt reversal of risk aversion,'' said Alvise Marino, an emerging-markets analyst at research firm IDEAglobal in New York.

The U.S. government seized control of Fannie Mae and Freddie Mac yesterday as a surge in mortgage defaults threatened to topple the companies, which make up almost half of the $12 trillion U.S. home-loan market.

The yield on Brazil's zero-coupon bonds due in January 2010 fell 3 basis points, or 0.03 percentage point, today to 14.8 percent, according to Banco Votorantim. The yield on the overnight futures contract for January delivery climbed 3 basis points to 13.95 percent.

To contact the reporter on this story: Lester Pimentel in New York at lpimentel1@bloomberg.net