Brasília – The general coordinator of National Treasury Public Debt Operations, Fernando Eurico Garrido, said a while ago that the announcement of the next administration’s economic team has caused a slight drop in interest rates on federal public bonds. He added, however, that it is still early for any type of assessment.
The names of the economic team members were disclosed in the middle of Wednesday afternoon (24th), shortly before the closing of the stock market. Guido Mantega will remain in charge of the Ministry of Finance, Miriam Belchior will head the Ministry of Planning and Alexandre Tombini will take charge of the Central Bank, replacing Henrique Meirelles.
This Thursday (25th), the government announced the result of the Federal Public Debt, which increased by 1.15% from September to October and reached 1.644 trillion Brazilian reals (US$ 953.2 billion). According to the Treasury, the stake of non-residents in the debt has risen from 154.1 billion reals (US$ 89.3 billion) to 155.3 billion reals (US$ 90 billion). However, with regard to the inventory, the stake of foreigners has dropped slightly, from 10.23% to 10.19%, because the debt has increased during the period. This is the first decline in six months.
Last month, the government announced measures to curb the growing appreciation of the Brazilian currency against the dollar, among them the raising of the Tax on Financial Operations (IOF in the Portuguese acronym). Regarding these measures, the National Treasury stated that foreign participation in government bond auctions has dropped in October and November. The trend, however, is ascribed to investors who purchase short-term Brazilian public debt bonds. They have been more affected by the raised IOF, and thus have reduced their stake in Brazilian public debt bonds.
The IOF gets spread across different investments over time, therefore non-resident investors who purchase longer-term bonds end up being less susceptible to this type of tax, considered as very short-term, and therefore continue placing their trust in the country.
*Translated by Gabriel Pomerancblum
