A year after it began, Brazil’s municipal bond market has been brought to a standstill by the federal government after Credit Suisse Group AG and Bank of America Corp. provoked a backlash by collecting $140 million in fees from the first two borrowings.
Brazil’s benchmark dollar bond yields more than debt with similar maturities even after an eight-year rally. President Luiz Inacio Lula da Silva’s administration says a stepped-up buyback plan would smooth out the yield curve and bring borrowing costs back to reality.
Brazil may buy back some of its international real-denominated bonds and sell new securities with longer maturities in a bid to temper capital inflows that helped drive the currency to a two-year high last month.
Brazil may sell 30-year real- denominated bonds abroad to discourage foreign investors from sending money into the country and driving up the local currency, deputy Treasury secretary Paulo Valle said.
Brazil will force public entities and state companies to shift 57.6 billion reais ($32 billion) in bonds they hold linked to the overnight rate into other types of public bonds, Paulo Valle, Treasury under secretary, said.