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Federal government debt rises 0.99% in April, boosted by Selic-linked bonds

Federal government debt increased 0.99% in April compared to March, to 6,704 billion reais, growth driven by bond issues linked to the Selic rate, which totaled 96.3 billion reais in the month, or 72% of the total volume issued, informed the National Treasury this Wednesday.

According to the general coordinator of public debt operations, Helano Borges Dias, April was characterized by an increase in global risk perception, mainly due to the market assessment that the first rate cuts in the United States are further away.

During the period, the domestic federal public debt (DPMFI) amounted to 6,423 billion reais, an increase of 0.97%, while the external federal public debt (DPMFe) reached 281 billion reais, an increase of 1.37%.

With the prevalence of issues of securities linked to the Selic (LFT), the share of these securities in the composition of the federal public debt went from 41.8% in March to 43.1% last month, approaching the maximum limit established in the Plan Annual Funding Program (PAF), which has established a range between 40% and 44% for the end of this year.

Dias specified that the May data, still evolving, highlight an improvement in this scenario, with more significant volumes of issuance of fixed rate securities linked to inflation. According to him, during the period there was a partial reversal of risk aversion, with a reduction in the level of the interest rate curve.

“We understand that, so far, the conditions are aligned for compliance with the PAF,” he said.

He argued that this change in the composition of securities has an impact on the cost of debt, but part of the effect is offset by the diversification of the Treasury’s portfolio. This is because at times when the Selic rate is higher, inflation tends to fall, which on the one hand increases the cost of paper, and on the other reduces it.

According to ministry data, the average cost of the stock of federal public debt accumulated in 12 months increased from 10.40% annually in March to 10.63% last month.

Regarding new issues of domestic debt securities, the average cost fell from 11.32% to 11.16% per year.

The period saw an increase in the average duration of Brazilian bonds to 4.13 years, compared to 4.11 years recorded in March.

As regards the liquidity cushion for the payment of public debt, a reduction of 0.33% was recorded in April, to 884.5 billion reais. The amount is enough to repay 8.35 months of bond maturity – in March it was 6.95 months.

Source: Terra

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