UPDATE 2-Paraguay fetches low-side yield in global bond debut
* Paraguay clinches lower rate than fellow newcomer Bolivia
* Yield comes in at tight end of pricing guidance - IFR
* Gov't taps appetite for emerging markets risk
By Paul Kilby and Mariel Cristaldo
NEW YORK/ASUNCION, Jan 17 (Reuters) - Paraguay has agreed to sell $500 million in 10-year international bonds on Thursday at a yield on the low side of expectations for its global credit markets debut, Thomson Reuters news service IFR reported.
The agreed yield of 4.625 was barely within revised pricing guidance for between 4.625 percent and 4.75 percent following market talk of interest exceeding 5 percent, IFR said.
It also came in below that paid by neighboring Bolivia, another newcomer to global credit markets, when it sold $500 million in 10-year bonds at par to yield 4.875 percent in October.
Paraguay, one of South America's poorest and most unstable nations, is expected to see a strong economic rebound this year and the government is keen to tap investor appetite for relatively risky but higher-yielding debt from smaller emerging market issuers.
Details of the final pricing and coupon were expected later on Thursday.
Paraguay's agriculture-dependent economy shrank 1.2 percent last year due to a poor soy harvest and a foot-and-mouth disease outbreak that hit beef exports, but the central bank expects a 10.5 percent bounce in 2013.
Paraguay is expecting a record soybean crop this season and it has won back former markets for its beef exports.
However, despite this year's more optimistic economic outlook, Paraguay faces many challenges.
Almost a third of country's 6.5 million people live in poverty. The landlocked nation is considered one of the world's most corrupt countries and political instability haunts its young democracy.
Last year, former President Fernando Lugo was ousted in a lightening-quick impeachment process that critics and governments in neighboring countries said was tantamount to a coup.
Current President Federico Franco was sworn in to head the government until a presidential election due on April 21 that will likely pit two center-right candidates.
Ratings agency Standard & Poor's gave the new bond a 'BB-' rating and said its stable outlook for the country reflected "our expectation that Paraguay will maintain cautious fiscal and monetary policies in the coming years, while continuing to strengthen its relatively weak institutions."
Paraguay's Central Bank chief Jorge Corvalan told Reuters last year Paraguay was not simply aiming at a one-off issue but wanted to "build a closer future relationship with the markets."
The soy- and beef-exporting nation last issued debt abroad in 2000 when it sold $400 million of debt in a direct sale to two banks in Taiwan, with which Paraguay has diplomatic relations.
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