by Marcela Ayres
BRASILIA (Reuters) – Brazil’s federal public debt fell 0.68% in September over August, to 5.443 trillion reais, the National Treasury reported on Wednesday, in a month marked by higher issuance prices amid fears of deterioration in public Accounts.
In the Annual Financing Plan (PAF), the perspective is that the general debt closes 2021 between 5.5 trillion reais and 5.8 trillion reais.
In September, the internal public securities debt dropped 0.98% to 5.186 trillion reais, due to the net redemption of 90.26 billion in the month, which offset the positive appropriation of interest of 38.72 billion reais .
Meanwhile, the external debt grew 5.83% over August, to 257.7 billion reais, in a month of strong advance of the dollar against the real, driven by fears of fiscal flexibility related to helping the most vulnerable.
Although the volume of federal public debt issues was significant in September – 145.93 billion reais –, redemptions were even higher, reaching 236.20 billion reais, basically due to the maturity of 234.07 billion reais in LFTs, securities linked to Selic.
This was the second highest value of monthly redemptions in the historical series, second only to the volume registered in April this year.
In a presentation, the Treasury stated that the auctions carried out throughout the month reflected the movement of the interest curve, with an increase in the cost of issuances.
The average cost of domestic debt issuances in public offerings rose to 6.9% per year, from 6.4% in August, while the average cost of the total debt stock accumulated in 12 months increased to 7.8%, of 7.6% in the previous month.
The conditions for the issuance of LTNs, fixed rate bonds, illustrate the increase in the month: the 24-month LTN began in September, being issued at an average rate of 9.13% and ended at 9.61%. The average rate of the 48-month LTN, in turn, jumped from 9.78% to 10.25% at the end of the month.
The movement in the interest rate curve continued this month, especially after the government acknowledged that it was aiming for a dribble in the spending ceiling rule to accommodate a temporary expansion of the new Bolsa Família, which will only apply for next year.
In a message, the Treasury highlighted that it “has re-adjusted its issuances according to market conditions, opting to reduce lots in times of greater volatility” amidst the perception of greater fiscal risk.
According to the General Coordinator of Public Debt Operations, Luis Felipe Vital, the “considerable rise” in the interest rate curve in October basically reflects the fiscal news.
He pointed out that the scenario was highly volatile in the month and that the Treasury had a “more active posture” in its market monitoring.
Despite this, Vital tried to emphasize that there has been no change in the debt management strategy, which has been the same since the Treasury revised its Annual Borrowing Plan (PAF) in May.
In a chart, the Treasury pointed out that the CDS, which measures the risk associated with the country, rose by almost 11% in October, contrary to the fall observed in emerging countries such as Chile, Mexico, Colombia and Peru.
SEPTEMBER DETAILS
In relation to holders, the participation of foreign investors in the internal securities debt rose to 10.1% in September, compared to 9.8% in the previous month.
As for the composition, securities that vary with the Selic, represented by LFTs, continued with a greater weight in the federal public debt, at 33.95% of the total, below the 36.11% in August. In the PAF, the range set for the year is 33% to 37%.
Fixed rate bonds advanced to 32.58% of the debt, compared to 31.86% in the previous month, against a target of 31% to 35% for 2021.
Inflation-linked papers, in turn, increased their share to 28.48% of the total debt, compared to 27.35% in August, with the reference for this year being 26% to 30%.
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