UPDATE 3-Brazil sells $500 mln in 2037 bonds at lower yield

* Brazil taps global bond market as demand improves

* Expected yield shows sharp decline in cost of credit

* Demand for re-tap about 13 times the amount offered (Updates with final results from Treasury)

By Guillermo Parra-Bernal

SAO PAULO, July 29 (Reuters) - Brazil paid lower borrowing costs in a reopening of its dollar-denominated global bond due 2037 BRAGLB37=RR, signaling strong demand as the country emerges from the global credit crisis, the National Treasury said on Wednesday.

Brazil sold $500 million of the bond in a reopening at a price of 108.63 cents on the dollar to yield 6.45 percent, below the initial guidance of 6.6 percent, the Brasilia-based Treasury said in a statement.

The bond carries a coupon of 7.125 percent. The sale brought the total of 2037 bonds in circulation to $3 billion.

Brazil first sold the 2037 bonds in January 2006 at 7.557 percent and reopened them in March of that year at 6.831 percent and again in January 2007 at a yield of 6.635 percent.

Wednesday's sale marks the third time that the Brazilian government has tapped international capital markets this year, in a further indication that conditions for investment-grade, emerging market borrowers are improving.

"To borrow at such low rates in such a difficult environment is a breakthrough for Brazil, which is stretching out its international yield curve and improving its profile at a reduced cost," said Marcelo Portilho, fixed-income strategist with Sao Paulo-based brokerage CM Capital Markets.

Asian investors will be offered an additional $25 million, or the equivalent of an additional 5 percent, of Wednesday's bond sale when markets open there, according to the statement.

Deutsche Bank and JPMorgan Chase & Co managed the deal.

CONFIDENCE

A person familiar with the deal said investors bid for an estimated $6.5 billion of the securities, 13 times the offered amount.

Speaking at a news conference in Brasilia, Finance Minister Guido Mantega said the decision to tap the bond market reflects the fact Brazil "is considered a safe haven" for investors.

"We are testing the waters," Mantega said, adding "we are taking advantage of a relaxed moment in markets."