Itaú BBA - Bond issuances abroad stand out in the beginning of 2018

FX and Capital Markets

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Bond issuances abroad stand out in the beginning of 2018

January 15, 2018

Brazilian companies resumed bond issuances abroad.

(full report attached)
 

International scenario boosts BRL despite Brazil’s sovereign rating downgrade 

Last Thursday, S&P downgraded Brazil’s sovereign credit rating to BB- from BB, with a stable outlook. However, as the external environment remains benign, the BRL followed emerging market currencies and strengthened during the week. The exchange rate closed the week at 3.21 reais per U.S. dollar, appreciating 0,7% (Charts 1, 2, 3 and 4).

Central Bank did not intervene in the FX market

The monetary authority did not intervene in the FX market last week. Its stock of FX swaps now stands at $24 billion (Charts 5 and 6). 

Currency flow is slightly negative in January

The currency flow was slightly negative by $71 million in the first week of the year, as $618 million trade outflows outsized $547 million financial inflows (Charts 7 and 8).

New bond offerings abroad

Brazilian companies resumed bond issuances abroad. Last week, a hospital operator offered $500 million in bonds due in 2028 and a beef company issued $1.0 billion in bonds due in 2024. Additionally, two transportation companies offered securities: one issued $500 million in bonds due in 2025 and the other placed $300 million in bonds due in 2024 (Chart 9 and table).

Foreign flows to the stock market are positive in January

Foreign flows to the stock market are positive by $792 million in January, as $895 million inflows to the spot market topped $103 million outflows from the futures market (Chart 10).

Investors changed their positions in dollar futures 

Non-residents reduced their short position in dollar futures by $1.2 billion, while institutional investors increased their short position in this derivative by $2.5 billion. Non-residents, banks and institutional investors hold FX derivative positions (dollar futures, cupom cambial and swaps) of $11.9 billion, $17.6 billion and $ -6.2 billion, respectively (Charts 11, 12, 13 and 14).



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