UPDATE 3-Brazil central bank outlines plan for private sector asset purchases

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By Jamie McGeever

BRASILIA, June 23 (Reuters) – Brazil’s central bank on Tuesday outlined its plan to buy private-sector bonds on the secondary market, a program aimed at tackling market dysfunction and lack of liquidity while improving general financing conditions in the economy.

Assets with a credit rating equivalent to “BB-“ or higher, which are non-convertible into shares and have a maturity of at least 12 months, will be eligible for purchase, the central bank said in a statement on its website.

Preference will be given to assets issued by micro, small and medium-sized companies, the central bank said. The sector has faced particular difficulty accessing credit since the economic crisis erupted a few months ago.

“It is a measure aimed at providing liquidity and better functioning of the secondary market for private sector assets, with potential benefits for financing productive activity in general,” the statement said.

Speaking in a virtual press conference from the central bank in Brasilia, president Roberto Campos Neto declined to give details on the timing or overall size of purchases.

But monetary policy director Bruno Serra noted that Brazil’s debenture market is just under 500 billion reais ($97 billion) and said the central bank would be a price taker, not a price maker.

Up to 7.5% of all the bank’s purchases can be in one company, Serra said, adding that it would buy no more than 25% of any one issue.

The central bank said it will provide daily updates on its website regarding any purchases, including details of the beneficiaries and amounts settled.

The bank’s go ahead to purchase private sector assets came in the “War Budget” constitutional amendment passed last month, authorizing emergency steps to combat economic fallout from the COVID-19 outbreak.

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