Itaú BBA - International Market Reopens for Brazilian Issuances

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International Market Reopens for Brazilian Issuances

May 11, 2015

The approval of fiscal measures and weaker U.S. labor market figures led the real to strengthen later on.

Brazilian currency appreciated again last week.

Notwithstanding some depreciation early in the week, the approval of fiscal measures and weaker U.S. labor market figures led the real to strengthen later on. The exchange rate closed the week at 2.97 reais per U.S. dollar, up by 1.3% from the previous week’s closing price and in line with its peer currencies (Charts 1, 2, 3 and 4).

Central bank started to roll over contracts expiring in June.

The monetary authority started to roll over $9.7 billion in swap contracts expiring in June, at a pace of 8,100 contracts per day. If this pace is sustained until the end of the month, the central bank will roll over 80% of the total batch and will decrease its short position in FX swaps by $1.96 billion (Charts 5 and 6).

Currency flow was quite positive in April.

The currency flow was positive by $13.1 billion in April, led by $10 billion in financial inflows. This was the biggest inflow of contracted currency for April since the beginning of the historical series in 1982 (Charts 7 and 8).

One new foreign issuance last week.

In the last week, the international market reopened for Brazilian corporate issuances. No Brazilian issue had been placed abroad since January. A cement company offered $564.2 million in bonds due in 2022 (Chart 9 and table).

Foreign flows to the stock market were positive in April and remain positive in May.

Foreign flows to the stock market were positive by $3.4 billion in April. The same trend is holding in May, albeit with thinner inflows ($308 million) (Chart 10).

Foreign investors reduced their long FX derivatives positions.

During the past week, non-resident investors reduced their long FX derivatives positions (especially dollar futures) to $39.6 billion. Meanwhile, institutional investors and banks increased their positions to $28.9 billion and $38.2 billion, respectively (Charts 11, 12, 13 and 14).



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