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UPDATE 4-Brazil central bank FX, bond intervention fails to prevent market rout

(Updates closing prices, adds comment)

BRASILIA, March 18 (Reuters) - Brazilian markets sank on Wednesday, with the real hitting a new low and stocks and bonds falling sharply, even as the central bank waded into the currency and bond markets to try and restore calm on another day of wild price swings and intense volatility.

The central bank sold $830 million in two rounds of spot FX intervention and announced a repurchase program for dollar-denominated sovereign bonds held by Brazilian banks, which will be carried out in conjunction with the Treasury.

But investors feared the trillions of dollars of stimulus and support from authorities around the world to limit the economic damage from the coronavirus pandemic may not be enough.

The real slumped almost 5% to as low as 5.2490 per dollar , bringing its losses so far this year close to 25%.

The benchmark Bovespa index closed down 11.45%, after trading was halted for the sixth time in a little over a week when losses reached 10% early in the session. The index is down 35% so far this month, and down more than 40% this year.

Economists at Goldman Sachs now predict a deep recession in Brazil this year, seeing economic contraction of 0.9%. Two weeks ago they were forecasting growth of 1.5%.

“The depreciation pressure on the real is likely to be managed/mitigated mostly through FX market intervention: dollar liquidity repo lines, auctions of dollar swaps, and outright spot dollar sales from reserves,” Goldman said in a note.

Traders were also bracing for the central bank’s latest interest rate decision scheduled for 6 p.m. local time Wednesday. The consensus was for a quarter-point cut to a new low of 4.00%, but the rapid economic and financial deterioration could see policymakers act more aggressively.

The central bank said in a statement that the bond repurchase program comes into force on Wednesday, and the Treasury said the auctions will be held on March 19, 20, 23, 24 and 25.

“The objective of this action is to continue providing support to the public debt market, ensuring the smooth functioning of this and other related markets,” it said.

A central bank spokesman said the total stock of bonds available for the repurchase operation currently held by Brazilian banks stands at $31 billion, and that the central bank could buy the whole lot, depending on banks’ demand for cash.

The last time the central bank conducted this type of bond market intervention was in 2008, he added.

Brazilian interest rate futures rose sharply on Wednesday, with implied rates on contracts out to 2027 and beyond nudging 9%. (Reporting by Jamie McGeever Editing by Tom Brown and Leslie Adler)

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