Itaú BBA - Brazil issues sovereign bonds abroad

FX and Capital Markets

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Brazil issues sovereign bonds abroad

July 25, 2016

The National Treasury raised $1.5 billion in international markets last week

(full report attached)

Exchange rate traded around 3.25

During a week of low volatility, the exchange rate was range-bound between 3.25 and 3.30 reais per U.S. dollar, closing the week at 3.27. The Brazilian currency appreciated 0.7% during the week and outperformed its peers (Charts 1, 2, 3 and 4).

Central bank maintains interventions in the FX market

The monetary authority continued to offer reverse swap contracts last week, carrying out five auctions of $500 million and announcing another one of $500 million to be executed today. Currently, the central bank’s short position stands at $55 billion (Charts 5 and 6).

Currency inflows last week 

The currency flow was positive last week, driven by $515 million financial inflows and $600 million trade inflows. Yet, month-to-date, the flow is negative by $600 million (Charts 7 and 8).

A new bond placement abroad last week

The National Treasury raised $1.5 billion in international markets last week, the second sovereign issuance abroad in 2016. These bonds are due in 2047. Month-to-date, Brazilian bond deals overseas topped $5 billion (Chart 9 and table).

Foreign flows to the stock market are positive in July 

Foreign flows to the stock market are positive in July, driven by $1340 million inflows to the spot market and $290 million inflows to the futures market (Chart 10).

Investors changed their positions in dollar futures 

Non-residents reduced their positions in dollar futures by $260 million. Institutional investors increased their positions in dollar futures by $740 million, while reducing their positions in FX swap contracts by $200 million. Non-residents, banks and institutional investors hold positions of $24 billion, $34 billion and $6 billion, respectively (Charts 11, 12, 13 and 14).


 

 



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