Nov. 18 (Bloomberg) -- Colombia sold 45 billion yen ($503 million) of Samurai bonds and Mexico plans to issue in Japan as soon as next month, joining Poland and the Philippines in turning to the Asian country’s debt market to help finance widening budget deficits.

Mexico hired Daiwa Securities SMBC Co. and Nomura Securities Co. to help it sell 10-year Samurai bonds as soon as next month with backing from the state-owned Japan Bank for International Cooperation, according a banker with direct knowledge of the plan. Colombia sold to yield 2.42 percent, Finance Minister Oscar Ivan Zuluaga told reporters in Bogota.

“The demand for Samurais is strong while the supply is running short,” said Tetsuo Ishihara, a senior credit analyst at Mizuho Securities Co. in Tokyo. “These emerging economies with high profile are a good buy.”

The Mexican and Colombian governments’ foray into the Samurai market follows international dollar bond sales earlier this year, part of a surge in overseas borrowing by developing nations seeking to plug deficits that swelled after the global recession throttled demand for exports and curbed tax revenue. Colombia sold $1 billion of bonds abroad in October after a $1.75 billion dollar debt issue from Mexico the previous month.

Oil, the biggest export from Mexico and Colombia, is down 46 percent from a record $147.27 a barrel in July 2008.

‘Diversify’

The yen-denominated bond sale is part of Colombia’s plan to diversify its sources of financing, Zuluaga said. The government also hopes to encourage more investment between Colombia and Japan.

Proceeds from the bond sale will replace $500 million in multilateral borrowing originally slated to support this year’s budget, Zuluaga said. The funds will remain abroad at least until the end of the year and may be used to pay dollar- denominated expenses, he said.

Zuluaga said last month the government would refrain from selling dollars in the local market for the rest of 2009 to stem a rally in the peso. The Colombian currency has strengthened 15 percent in the past six months, the second-best performance among seven Latin American currencies tracked by Bloomberg.

Mexico’s Congress approved a 2010 budget yesterday that includes the widest deficit in more than two decades after declines in tax revenue and production at state-owned oil company Petroleos Mexicanos. Colombia’s central government posted a budget deficit of 0.9 percent of gross domestic product in the first half of the year, compared with a 0.1 percent gap during the same period in 2008.

Diversify Debt

Mexico has bigger financing needs and “it’s beneficial for the government to diversify its debt sales,” said Alejandro Hernandez, who oversees 13.5 billion pesos ($1.04 billion) in fixed-income assets at Grupo Financiero Interacciones SA in Mexico City.

A Mexican spokesman Finance Ministry didn’t return a phone call seeking comment.

Samurai bonds, or yen-denominated notes sold by foreign borrowers in Japan, yielded 1.76 percentage points more than government debt Nov. 12, the smallest gap since July 20, 2008, according to an index compiled by Nomura.

Narrowing yield spreads prompted Poland to sell 44.8 billion yen of Samurai bonds this month as it seeks to fund a budget gap it expects will almost double next year. The Philippines may sell Samurai bonds in “early” 2010, Finance Undersecretary Rosalia de Leon said Nov. 4, as it tries to plug a record deficit.

Mexico last sold Samurais in September 2000 when it raised 50 billion yen from four-year, 2.25 percent bonds, according to data compiled by Bloomberg. Colombia privately sold 22.5 billion yen in Samurai bonds, Japan Bank said in December 2005. That was the first time Japan Bank guaranteed the bonds of a non-Asian issuer, it said at the time.

To contact the reporters on this story: Yusuke Miyazawa in Tokyo at ymiyazawa3@bloomberg.netTakashi Ueno in Tokyo at tueno@bloomberg.net

Last Updated: November 18, 2009 14:24 EST