Emerging Markets-Colombia and Brazil test investor appetite

(Updates with final pricing, background)

By Daniel Bases

NEW YORK, Jan 6 (Reuters) - Brazil and Colombia each sold $1 billion of 10-year bonds on Tuesday as debt markets showed signs of recovering from the 2008 shutdown, although both nations had to offer discounts to lure still shaky investors.

The flurry of deal activity is an important barometer for sovereign as well as corporate borrowers given that the credit crisis all but closed the new issuance market in the second half of last year.

Tuesday's deals are among the very first to attempt to scale the large global emerging market financing hurdle estimated by Dealogic at $450 billion for 2009.

"Investors are not in a risk averse mode right now. For the right price people are willing to put money to work and it looks like the books are oversubscribed," said Cristina Panait, emerging market debt strategist at Los Angeles-based fund manager Payden & Rygel.

Until Mexico broke the dry spell with a $2 billion 10-year deal Dec. 18, the previous sovereign issue was a $1.5 billion 10-year bond sold by Turkey on Sept. 3.

Emerging market assets held up well during the early phases of the credit crisis but were hit hard when U.S. investment bank Lehman Brothers collapsed, causing investors to sell these profitable assets indiscriminately to shore up core positions.

Peru, Philippines and Turkey are said to be looking to come to the market as well, Panait and other fund managers said.