Brazil’s Public Debt Expected to Hit 7.4 Trillion Reais in 2024

Summary

  • Brazil’s public debt is projected to be between 7 and 7.4 trillion reais in 2024, as compared to 6.520 trillion reais in 2023.
  • The Treasury plans to extend the debt, particularly in fixed-rate securities, introducing 72-month National Treasury Notes (LTN) into the market.
  • Having launched its first sustainable sovereign bonds in 2023, the Treasury aims to have regular market presence with the development of a sovereign interest rate curve as its main objective.
  • The average maturity of Brazil’s debt is expected to stay between 3.8 and 4.2 years in 2024, as opposed to 4 years in 2023.
  • The amount of debt maturing in the next year is predicted to be between 17% to 21%, as compared to the 20.1% of last year.
  • There’s an expected increase in securities linked to the benchmark interest rate Selic, significantly distancing from the target of 23% set for 2035.

Additional Information

The projected public debt of Brazil for 2024 is estimated to be between 7 trillion reais and 7.4 trillion reais, an increase compared with the 6.520 trillion reais ($1.31 trillion) in 2023.

In its recent document, The Treasury outlines its strategy to proceed with the debt lengthening strategy, specifically targeting fixed-rate securities. This strategy now includes the introduction of 72-month National Treasury Notes (LTNs) in the offered securities.

After initiating the issuance of sustainable sovereign bonds in 2023, the Treasury is planning to maintain a continuous presence in this segment. The primary goal is the development of the sovereign interest rate curve, setting a benchmark for the Treasury and the Brazilian corporate sector.

Anticipated Changes in 2024

From the outlined plan, the typical maturity of Brazil’s debt profile is projected to vary from 3.8 to 4.2 years in 2024, contrasting with 4 years in 2023.

Furthermore, the percentage of debt due for maturing in the subsequent 12 months is expected to be in the 17% to 21% bracket, a slight variation from the 20.1% observed in the previous year.

The Treasury has also conceded that the percentage of securities linked to the benchmark interest rate Selic may rise this year to 40%-44% of the total, an increase from last year’s 39.7%. This is a departure from the aimed target of 23% set for 2035.

Short-Term Increase Strategy

The Treasury asserts that in the short term, the strategy to increase these securities is because they have longer maturities on average compared to fixed-rate securities. These securities play a crucial role in managing the risk of refinancing Brazil’s debt.

However, the success of this financing strategy focusing more on issuing fixed-rate and long-term inflation-indexed securities is hinged on “macro-fiscal conditions that allow an economic growth and debt sustainability agenda.”

($1 = 4.9590 reais)

The changing dynamics of Brazil’s public debt and their impact on benchmark interest rates could potentially influence Forex trading, especially for assets related to the Brazilian real.

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