(Corrects to show revision is for profit estimates)
By Davide Scigliuzzo
NEW YORK, July 22 (IFR) - Bonds of Brazilian banks rallied on Tuesday after prosecutors in the country slashed estimates of the profits made by the banks on savings accounts more than two decades ago.
The announcement fueled optimism over the bank's position in a landmark case that could cause some of the country's largest lenders to pay billions in fines.
Brazil's attorney general office reduced its estimate of the gross profits the banks made from depositors during that period to BRL21.87bn from BRL441.7bn, according to Reuters.
The announcement, made on Monday after the market close, sent bonds of most Brazilian lenders sharply higher on Tuesday.
"The market is on fire," said a New-York based trader.
Banco do Brazil's curve tightened by 20bp on the news, with the lender's perpetual notes trading up more than 1 point, according to a second trader.
Rival state-owned lender Caixa Economica Federal saw its curve tighten by 14bp, with the spread on its newly issued Tier 2 note compressing by 17bp. Bonds issued by Itau tightened by 7bp.
Millions of depositors claim they were incorrectly remunerated when Brazilian authorities changed the indexes to which savings rates were pegged between 1989 and 1991.
The case is under the review of the country's supreme court. (Reporting by Davide Scigliuzzo; editing by Paul Kilby)