Brazil sells fewer LBCs at its weekly auction
Reuters, Thursday, September 03, 1998 at 17:30
SAO PAULO, Sept 3 (Reuters) - Brazil's Central Bank on
Thursday sold a lower-than-average 340 million reais worth of
728-day, post-fixed Central Bank Letters (LBCs) at its weekly
auction, dealers said.
Dealers speculated that the Central Bank sold fewer papers
because it was not ready to pay a premium wanted by banks due
to global financial turmoil. The notes also carried a longer
than usual maturity. The Central Bank had been selling LBCs
with a 91-day maturity in the last few months.
Analysts said the longer-term LBC may have been issued to
make the paper more attractive to investors. However, if that
was the Central Bank's intention, it may not have worked since
it sold less paper in the end, dealers said.
At Thursday's auction, the Central Bank sold the 728-day
LBCs at the average annualized benchmark overnight rate in the
Sept. 4, 1998--Sept. 4, 2000 period, dealers said. On Sept. 2,
the overnight rate was 19.11 percent a year.
Post-fixed letters carry less risk for investors than
letters paying pre-fixed rates. The LBCs' pay rates are set
after they mature, based on the average overnight benchmark
rate for the period.
Dealers also speculated that the sale of fewer LBCs could
be an attempt by the Central Bank to keep liquidity high in the
banking system and prevent pressure on overnight interest
rates.
Thursday's auction result indicated that about 1.46 billion
reais will be added to the banking system as some 1.8 billion
reais in old LBCs are coming due on Sept 4.
Copyright 1998, Reuters News Service |
