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BRASILIA, Jan 28 (Reuters) - Brazil may take advantage of low interest rates to issue a 20-year benchmark bond later this year if demand is sufficient, the country’s Treasury said on Tuesday, as it set out its 2020 debt forecasts and financing plans.
The debt issue would likely come in a one-off auction, Treasury officials said, adding that a more aggressive move to extend the maturity of Brazil’s debt profile would begin in 2021 when more floating-rate debt comes due.
The average maturity of Brazil’s debt this year is likely to be between 3.9 and 4.1 years, little changed from last year’s 4.0 years, the officials said.
In addition to extending the maturity profile of the debt, both in dollars and euros, the officials said the aim over the coming years is to switch to more fixed-rate and inflation-linked borrowing from floating rate securities.
While the total stock of outstanding debt this year could rise as much as 11%, public finances are healthier than forecast a year ago and heading in the right direction, the Treasury said.
“Progress on the (government’s) reform agenda is already being reflected in economic conditions, paving the way for low interest rates, inflation under control and a rebound in activity,” the Treasury said in its 2020 debt and borrowing outlook.
“The ongoing fiscal consolidation is key to sustaining this outlook, reducing debt/GDP in the medium term,” it added.
Brazil’s federal public debt rose 9.6% last year to 4.25 trillion reais ($1.01 trillion), Treasury figures on Tuesday showed, within its 4.1-4.3 trillion reais target range.
The debt is expected to rise to between 4.5 trillion and 4.75 trillion reais this year, while the federal government’s net financing need this year is forecast at 1.07 trillion, the Treasury said.
It said it expects securities linked to the central bank’s benchmark Selic rate to account for between 40% and 44% of outstanding debt this year versus 38.9% last year, while fixed-rate securities will account for between 27% and 31%, compared with 31% last year.
Official interest rates are at a record low 4.5% and could go lower still, while economists expect inflation this year to undershoot the central bank’s official target of 4.00%, which is already low by historical standards.
Foreign investors held 10.43% of domestic debt securities in December, down from 11.22% a year earlier, according to the Treasury. (Reporting by Marcela Ayres and Jamie McGeever; Editing by Bernadette Baum and Tom Brown)
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