What could Brazil’s debt sale failure mean for some US municipalities?

Brazil has canceled the sale of its longest fixed-rate local bonds three times in the past month after Europe’s debt crisis eroded demand for less-traded assets.

The government received no bids it found acceptable for the 150 million reais ($81 million) of 10 percent notes due in 2021 offered yesterday.

...While yields on the so-called NTN-Fs have fallen to 12.54 percent after rising to a two-month high of 13.20 percent on May 7, bids were “too disperse” in the auction, Fernando Garrido, the Treasury’s debt operations coordinator, said in an e-mail yesterday. Investors are avoiding little-traded securities in developing countries after Greece, Spain and Portugal had their credit ratings cut last month...

...Demand for the longest-maturity U.S. debt has picked up while that for Brazil’s slumped.

...Foreign investors have disappeared from debt auctions, adding to the Treasury’s struggles, said Paribas’s Donadio and Tony Volpon, Latin America strategist at Nomura Holdings Inc. in New York. International money managers have backed off amid concern Europe’s debt crisis will spread, said Volpon.

Paulo Winterstein and Tal Barak Harif
Bloomberg