Brazil’s federal public debt closes July at US$1.03 trillion, up 1.24%

RIO DE JANEIRO, BRAZIL – The stock of Federal Public Debt (DPF) rose 1.24% in July and closed at R$5.395 (US$1.03) trillion. The data were released on Wednesday, August 25, by the Federal Treasury. In June, the DPF stood at R$5.329 trillion.

There was a net issuance of R$24.37 billion in debt, which means that the Treasury sold more bonds to finance itself on the market than it redeemed previously issued securities. In all, R$142.443 billion were issued and R$118.076 billion redeemed.

This was the first time that net issuance had occurred in July since 2009, according to the Treasury. Nevertheless, the total volume of funding was below the average of the past few months. “In July, the Treasury issued less than the average of the past 12 months, while maintaining a comfortable cash position for future expenses,” the agency reported.

The interest rate adjustment in the DPF stock, in turn, totaled R$41.66 billion last month.

DPF includes both domestic and foreign debt. The domestic Federal Public Securities Debt (DPMFi) rose 1.02% in July, closing the month at R$5.155 trillion. The foreign Federal Public Debt (DPFe) grew 6.26% in the month, totaling R$240.87 billion at the end of last month.

12-MONTH PERIOD

The share of the DPF maturing in 12 months rose from 22.48% in June to 22.72% in July, according to the Treasury. During this time, R$ R$1.225 trillion in bonds will mature. According to the agency, the issuance profile and the entry of the July 2022 maturity date in this indicator’s timeframe have influenced the increase.

In turn, the average term of the federal public debt rose slightly from 3.73 years to 3.77 years. The average cost of the DPF stock in 12 months rose to 7.64% per year. The average cost of new issuances also rose last month, from 5.77% to 6.09% per year.

COMPOSITION

With net redemptions of fixed-rate securities in July and increased issuance of SELIC- and inflation-linked securities, the debt composition changed last month.

The share of fixed-rate securities in DPF dropped in July, to 32.05%. In June, it stood at 33.33%. Floating-rate bonds, on the other hand, had a larger share, rising from 35.07% to 35.67%.

Inflation-linked bonds rose to 27.59% of the DPF stock in July, compared to 27.13% in June. The share of foreign exchange bonds in DPF increased from 4.46% to 4.69%, under the same comparison.

After the adjustment in the Annual Borrowing Plan (PAF) targets last month, all securities are within the targets defined by the Treasury for the 2021 year.

The target range pursued by the Treasury for securities linked to the basic interest rate in 2020 ranges from 33% to 37%. For fixed rate bonds, the range is 31% to 35%. In the case of bonds with price indexes as reference, the target ranges from 26% to 30%, and for foreign exchange bonds, from 3% to 7%.

FOREIGNERS

The share of foreign investors in public debt fell in July, despite an increase of R$3.3 billion in domestic debt securities held by these investors in the month. According to data released by the Federal Treasury, the share of non-Brazilian residents in the DPMFi stock fell from 9.71% in June to 9.67% last month. The stock of securities held by foreigners totaled R$498.72 billion in July.

Financial institutions continue to hold the largest share of DPMFi stock, with 30.77%, according to the July position. The stock in the hands of these institutions totals R$1.586 trillion. Investment funds also bought more securities and increased their share (from 23.63% to 24.22%). The debt stands at R$1.248 trillion.

The Social Security group reduced its share from 22.96% to 22.33% from one month to the next, with a stock of securities R$20 billion lower.