Itaú BBA - International bond issuances picked up last week

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International bond issuances picked up last week

June 8, 2015

International bond issuances gave a boost to the Brazilian real, which strengthened throughout the week.

(full report attached)

Exchange rate less pressured in the past week

International bond issuances gave a boost to the Brazilian real, which strengthened throughout the week. On Friday, however, stronger U.S. labor market data pressured the currency. The exchange rate closed the week at 3.14 reais per U.S. dollar, appreciating 1.14% and outperforming its peers (Charts 1, 2, 3 and 4).

Central bank started to roll over contracts expiring in July

The monetary authority started to roll over the $8.7 billion in FX swap contracts expiring in July, at a pace of 7,000 contracts per day. If this pace is maintained until the end of the month, the central bank once again will roll over 80% of the total batch, and will decrease its short position in FX swaps by $1.7 billion (Charts 5 and 6).

Negative currency flow in May

The currency flow was negative by $1.3 billion in the last week of May, with $3 billion in financial outflows and $1.7 billion in trade inflows. The contracted currency flow in May was negative by $2.1 billion (Charts 7 and 8).

Three new bond issuances abroad last week

International issuances picked up last week. Three different companies issued $549.5 million, $2.5 billion and $325 million in bonds due in 2022, 2115 and 2025, respectively (Chart 9 and table).

Foreign flows to the stock market stood near zero in May

After three months of positive results, foreign flows to the stock market stood near zero in May (-$ 26 million), as inflows to the spot market were offset by outflows from the futures market. So far in June, foreign flows are slightly positive by $23 million (Chart 10).

Non-resident investors reduced their long FX derivatives positions

After increasing their long positions in the previous week, non-residents reduced their long FX derivatives positions by $2.8 billion to $39.4 billion. Institutional investors kept their long positions virtually unchanged at $28.4 billion, while banks expanded their positions to $36.8 billion (Charts 11, 12, 13 and 14).


 



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