(adds comment from Vatican) By Christina Fincher LONDON, Nov 6 (Reuters) - A bond to raise $1 billion for life-saving vaccines in the world's poorest countries is due to be sold on Tuesday, heralding a potential step-change in the way rich countries use development budgets. The offering is the first of its kind to tap the international capital markets for funding to fight preventable diseases like measles, polio and tetanus, which kill more than two million children a year in impoverished countries. The scheme is the brainchild of British finance minister Gordon Brown, who has long campaigned for bond financing as a way of "front-loading" development aid. A source close to deal said the lead managers hoped to price the bond offering by 1400 GMT Tuesday, when Brown addresses a reception in London attended by representatives from the Vatican, the World Bank and aid groups. Proceeds from the bond sale will go to a new development agency, the International Finance Facility for Immunisation, which will be administered by the World Bank. This week's offering is only the first leg of the initiative, which aims to raise $4 billion in the bond markets over the next 10 years. The programme currently has the backing of six European countries -- Britain, France, Italy, Spain, Sweden and Norway. Brazil and South Africa have also committed to join at a later date, with more countries waiting to see the outcome of the initial transaction. MILLENNIUM DEVELOPMENT GOALS Britain's Brown argues bond financing is essential if the Millennium Development Goals on sharply reducing child mortality are to be met. "It is estimated these bonds will fund the immunisation of 500 million children over the next 10 years and save 10 million lives as a result," the UK Treasury said in a statement. The Vatican has also given its blessing to the project and Cardinal Renato Martino, head of Vatican's Justice and Peace Council, will attend Tuesday's reception in London and buy the first bond in the Pope's name. "The gesture, real and symbolic at the same time, shows the Vatican's full support for an initiative that with widespread international backing will bring immediate and direct benefits in the field of development aid," the Vatican said in a statement. But the plan, which uses rich countries' aid pledges as collateral to raise funds in the capital markets, has run into opposition, particularly from the United States which is reluctant to make commitments under one administration that must be passed on to the next. Some lobby groups have also expressed concern that a scheme that relies on future aid commitments could pose problems further down the line. The bond was roadshowed to investors early last month but difficult market conditions and late investor interest meant the launch was delayed. Lead managers Goldman Sachs and Deutsche Bank released price guidance early on Monday and are in the final stages of book-building. Initial price guidance suggests the bond, which carries a five-year maturity and a top-notch triple-A credit rating will be priced to yield 30 to 33 basis points over the current five-year U.S. Treasury bond.
