Brazil, Russia Cancel Debt Auctions; Head-in-Sand Move Won’t Work

Brazil, RussiaCancelDebtAuctions; HeadinSandMoveWon’tWork

// Mish’s Global EconomicTrendAnalysis

Russia and Brazil don’t like escalating interest rates. Their "solution"? Cancel government debt auctions.


Yesterday, Reuters reported Russiacancelsdomesticbondauctioncitingmarketconditions

Russia’s finance ministry cancelled its weekly domestic bond auctions for the second week in a row on Tuesday, saying in a statement the decision was "based on an analysis of current market conditions".

Yields on so-called OFZ bonds have risen by 70-80 basis points since the start of the year. A new ministry sale could have potentially pushed the rates higher, analysts said.


Today, Bloomberg reports BrazilGovernmentYieldsFallAfterAuctionsCanceled.

Brazilian government bond yields extended their drop from a four-year high after the Treasury canceled auctions of fixed-rate and zero-coupon bonds amid a selloff in emerging-market assets.

Yields on local bonds maturing in 2017 declined 18 basis points, or 0.18 percentage point, to 12.80 percent at 3:20 p.m. in Sao Paulo after increasing Feb. 3 to 13.14 percent, the highest since January 2010.

The Treasury cited market conditions for its decision and said the last time it canceled auctions to sell zero-coupon LTNs and fixed-rate NTN-Fs was in July. The government had planned to sell zero-coupon bonds maturing in 2014, 2016 and 2018 and fixed-rate bonds maturing in 2021 and 2025.

Head-in-Sand Move Won’t Work

This kind of head-in-the sand move won’t work long. In fact, it did not work at all, it only created an illusion of working. Unless underlying conditions change quickly, and favorably (both doubtful), there is a strong likelihood of increased volatility when auctions resume.

Mike "Mish" Shedlock

Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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