Brazil public debt hits record US$934 billion as Treasury swells emergency cash cushion

RIO DE JANEIRO, BRAZIL – Brazil’s record public debt rose above RS$5 trillion (US$900 billion) in February, the Treasury said on Wednesday, March 24th, as it squirreled away most of the new net issuance to its emergency cash buffer, or liquidity cushion.

Treasury also said rock-bottom borrowing costs anchored the cost of servicing near all-time lows. The Central Bank’s interest rate hike this week will not affect its strategy and could even boost investor demand for Brazil’s debt, it added.

Total federal debt rose 2.75% in February to RS$5.2 trillion (US$934 billion), while the total domestic debt rose 2% to RS$4.95 trillion, Treasury said.

Treasury said its liquidity cushion rose 15.8% in nominal terms to R$933 billion from RS$806 billion the month before, thanks mainly to RS$11.5 billion of new debt issuance. That was the third highest month of net issuance on record.

Treasury said that is enough to cover up to seven months’ worth of debt maturities, noting that debt maturing in April and May alone totals around RS$581 billion.

With inflation at a four-year high of 5.2% and well above the bank’s previous 2021 goal of 3.75%, it raised its benchmark Selic rate this week by 75 basis points to 2.75%.

Luis Felipe Vital, head of debt management, told reporters in an online press conference that this is “not a concern for the Treasury at the moment.” “I think this moment in the monetary policy cycle is good for demand for various securities, for example, (floating rate) LFTs, or longer-dated securities,” he said.

The average cost of servicing inflation-linked NTN-B notes in the year to February jumped to a four-year high of 11.16% from 10.54%, Treasury said.

The average interest rate on the domestic federal debt stock held steady at a record low 7.15%, and the average interest rate to service the wider public debt stock slipped to a new low of 8.11% from 8.29%.