SAO PAULO, Sept 21 (Reuters) - Brazil’s Treasury bought back fixed-rate notes but failed to sell new ones at two extraordinary auctions on Monday as government bond yields soared amid a growing political and economic crisis.
The Treasury said it bought back 850,000 fixed-rated notes known as NTN-F. But it did not sell any of the 150,000 NTN-F notes it had offered, each worth 1,000 reais ($250) at maturity.
It later called another extraordinary action for Tuesday to buy inflation-linked NTN-B notes.
The Treasury has been trying to calm an increasingly jittery local debt market by calling additional repurchase auctions outside its published schedule, traders said. It has also canceled some scheduled auctions to sell new bonds as yields soared.
As investors demand higher returns to hold government bonds, yields paid on Brazil’s interest-rate contracts maturing in January 2017 jumped 31 basis points to 15.43 percent.
Market appetite for fixed-rated debt also tends to fall when interest rates are expected to rise. Investors expect Brazil to further raise its benchmark Selic rate next year as inflation accelerates, a central bank survey showed on Monday.
Yields paid on Brazilian bonds have been rising sharply as a growing political crisis challenges President Dilma Rousseff’s ability to pass crucial austerity measures through Congress.
Many investors believe Brazil is poised to lose its coveted investment-grade rating from a second rating agency in the next few months as a result of the crisis. (Reporting by Flavia Bohone, writing by Walter Brandimarte Editing by W Simon)