Itaú BBA - International market reopens to Brazilian corporate issuances

FX and Capital Markets

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International market reopens to Brazilian corporate issuances

May 23, 2016

An oil & gas company issued $6.75 billion in bonds expiring in 5 and 10 years.

(full report attached)

U.S. dollar strengthens after Fed minutes

In the minutes of their last meeting, Federal Reserve officials indicated the possibility of an interest rate hike in June, surprising market expectations of a more cautious stance. The possibility of an earlier rate hike pressured exchange rates around the world. However, the Brazilian currency closed the week at 3.52 reais per dollar, appreciating 0.3% and outperforming its peers (Charts 1, 2, 3 and 4).

Central bank eases interventions in the FX market 

The monetary authority sold just $1.0 billion in reverse swap contracts last week. In May, the central bank reduced its short position in swaps by $6.9 billion (Charts 5 and 6).

Currency outflows in May 

After a positive reading in April, the currency flow is negative in May, as $6.3 billion financial outflows outsized $4.0 billion trade inflows (Charts 7 and 8).

One new foreign issuance last week

An oil & gas company issued $6.75 billion in bonds expiring in 5 and 10 years. Total Brazilian issuances abroad add up to $8.25 billion year-to-date, up from $8 billion in 2015 (Chart 9 and table).

Foreign flows to the stock market are negative 

Foreign flows to the stock market are negative in May, driven by $343 million outflows from the spot market and $316 million outflows from the futures market (Chart 10).

Institutional investors reduced their positions in FX swaps

Institutional investors reduced their positions in FX swaps by $1 billion. Other positions were virtually unchanged. Non-residents, banks and institutional investors hold positions of $23 billion, $41 billion and $17 billion, respectively (Charts 11, 12, 13 and 14).


 

 



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