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UPDATE 5-Brazil sells $3.5 bln in 2045 bonds, offers to buy back other debt

(Updates with terms of 2045 bond sale) BRASILIA/SAO PAULO, July 23 (Reuters) - Brazil's Treasury on Wednesday sold $3.5 billion worth of a new 30-year global bond, while offering to buy back shorter-dated maturities that had been issued under costlier terms. The deal aims to facilitate future debt issues by Brazilian companies, whose bonds are often priced in accordance with the country's sovereign yield curve, or the returns paid on different government bond maturities. "That creates a new point in the (yield) curve, withdrawing bonds that are not a good reference anymore," said a source with direct knowledge of the deal. The deal, which was managed by Bank of America Merrill Lynch , Deutsche Bank and Itau, does not mean that the government has given up plans to issue a yen-denominated bond this year, the source added. The Treasury said in a statement it sold around $3.5 billion of the new bond due in January 2045 by the close of U.S. markets, paying investors a yield of 5.131 percent, or 187.5 basis points above comparable U.S. Treasuries. It was the widest spread over Treasuries for a 30-year bond issued by the Brazilian government since 2009, the Treasury said, signaling a decline in global liquidity conditions. An additional $50 million of the 2045 bonds will be offered to Asian investors under the same terms. About $2 billion of the sale's proceedings will be used to buy back shorter-dated bonds, another source with knowledge of the deal said. The remaining $1.5 billion will be used for general government purposes. The sale was similar to a debt management deal launched last October, when the Treasury issued $3.25 billion worth of a new global bond due in January 2025 and bought back $2.2 billion worth of bonds maturing between 2017 and 2030. Initially, Brazil had offered to sell the 2045 bond at a premium of around 200 basis points over Treasuries. It was later able to lower that offer as demand for the new bond reached $4.5 billion, Thomson Reuters' IFR reported. Worried about tighter U.S. monetary conditions and a deteriorating Brazilian economy, investors had been demanding increasingly higher spreads from Brazilian bonds since the beginning of 2013. That trend reversed last May as investors started betting that U.S. interest rates will not go up before the second half of 2015. More recently, appetite for Brazilian assets grew further as opinion polls pointed to a tighter presidential race, fueling speculation that an opposition candidate could defeat President Dilma Rousseff in October. Investors accuse Rousseff, a center-left politician, of excessive intervention in the economy. Details of the repurchase of other bonds will be announced on Thursday, the Treasury said. Currently, there are a combined $11.9 billion in notes maturing in 2024, 2025, 2027, 2030, 2034, 2037 and 2041. Brazil has offered to repurchase those bonds paying premiums that range from 50 basis points to 176 basis points over comparable U.S. Treasuries, according to IFR.

Bonds being repurchased by the Brazilian Treasury:

Bond Maturity Coupon Buy-back Outstanding (pct) guidance amount

(bps over USD Treas)

Global 2024 April 15, 8.875 50 1,145,684,000

2024

Global 2024 B April 15, 8.875 50 95,037,000

2024

Global 2025 Feb 4, 8.750 66 1,043,516,000

2025

Global 2027 May 15, 10.125 84 1,396,058,000

2027

Global 2030 March 6, 12.250 126 466,450,000

2030

Global 2034 Jan 20, 8.250 174 1,956,412,000

2034

Global 2037 Jan 20, 7.125 176 2,870,304,000

2037

Global 2041 Jan 7, 5.625 173 2,925,000,000

2041

(Additional reporting by Guillermo Parra-Bernal and PatrĂ­cia Duarte, writing by Walter Brandimarte; Editing by Paul Simao, Dan Grebler, Tom Brown and Steve Orlofsky)