Itaú BBA - New bond issuances abroad last week

FX and Capital Markets

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New bond issuances abroad last week

December 11, 2017

In the year through November, Brazilian bond issuances overseas totaled $31.2 billion

(full report attached)
 

Exchange rate closed the week at 3.29

The dollar strengthened broadly after the U.S. Senate approved the tax reform. Domestically, uncertainties surrounding the approval of the pension reform added volatility, and the exchange rate closed the week at 3.29 reais per dollar, depreciating 1.1% and underperforming most of its peers (Charts 1, 2, 3 and 4).

Central Bank continued to roll over FX swap contracts due in January

The monetary authority continued to roll over swap contracts due in January 2018, at a pace of 14,000 contracts per day. If this pace is sustained until December 20, the Central Bank will fully roll over the $9.6 billion in contracts expiring in January. Its stock of FX swaps now stands at $24 billion (Charts 5 and 6). 

Currency flow was positive in the last week of November 

The currency flow turned positive last week, as $2.7 billion trade inflows outsized $1.2 billion financial outflows. Nevertheless, in November, the flow was negative by $636 million (Charts 7 and 8).

New bond issuances abroad

There were several bond offerings last week. One financial institution issued $1.25 billion in perpetual bonds, while another firm in the same industry issued $500 million in bonds due in 2022. A food company issued $500 million in bonds due in 2027 and an airline company issued $500 million in securities due in 2024. In the year through November, Brazilian bond issuances overseas totaled $31.2 billion (Chart 9 and table).

Foreign flows to the stock market are positive in early December

Foreign flows to the stock market were positive by $260 million in the first week of the month, as $443 million inflows to the futures market outsized $183 million outflows from the spot market (Chart 10).

Non-residents changed their FX derivatives positions 

Non-residents increased their long position in dollar futures and reduced their position in cupom cambial. Non-residents, banks and institutional investors hold FX derivative positions (dollar futures, cupom cambial and swaps) of $17.2 billion, $9.7 billion and $ -3.5 billion, respectively (Charts 11, 12, 13 and 14).



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