04/09/2024 – 15:10
The National Treasury announced this Wednesday a change in the targets of its 2024 Annual Financing Plan (PAF), now foreseeing a larger share of bonds linked to the Selic rate in the composition of the federal public debt amid the increase in demand for the paper, which is lower risk for the investor, amid uncertainties surrounding the monetary policy of the United States.
The ministry reported that the new limits for securities linked to the Selic rate will rise to a level between 43% and 47% this year, compared to the target set in January of closing 2024 with a share of 40% to 44%.
On the other hand, the forecasts for the share of inflation-linked securities were reduced from 27% to 31% to 25% to 29%, and for fixed-rate securities from 24% to 28% to 22% to 26%.
There was no change in the limits for exchange-linked securities (3% to 7%). The targets for the average term of the federal public debt (3.8 to 4.2 years) and for the percentage of securities maturing in 12 months (17% to 21%) were also maintained.
“The new reference limits of the PAF 2024 allow for a strategy that is more aligned with market conditions and without bringing additional pressure to the formation of prices for bonds to be offered over the last four months of the year, ultimately contributing to the proper functioning of the public bond market,” said the Treasury in a note.
Last Friday, the ministry reported that the federal public debt rose 1.02% in July compared to June, to 7.140 trillion reais. According to the data, the share of bonds remunerated by the Selic rate reached 44.95% last month, above the 44% ceiling established by the PAF until then. The share of fixed-rate bonds was 21.33%, below the previous floor of 24%.
In its note this Wednesday, the Treasury stated that the appetite for bonds indexed to the Selic rate this year increased due to uncertainties about monetary policy in the United States.
“Such uncertainties have affected emerging markets, putting pressure on exchange rates and increasing risk aversion. These factors have impacted the interest rate curve and demand for National Treasury bonds, with investors seeking lower-risk assets,” he said.
According to the ministry, changes in taxes and behavior of economic agents also affected the market for inflation-linked bonds, “leading the Treasury to act more cautiously.”
The Treasury argued that the increased issuance of Selic-linked bonds contributed to keeping the liquidity buffer for debt management above the prudential level. Currently, this reserve is sufficient to cover 7.97 months of maturities.
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