Federal public debt drops 0.7% in July, and Treasury sees positive scenario in August

Brazil’s federal public debt dropped 0.70% in July, to R$ 5.804 trillion, the National Treasury informed this Monday (29), in a month with relative stability in cost and maturity indicators of securities and which preceded a period of improvement in the economic environment.

According to the Treasury, the reduction in the debt stock was explained by a net redemption of R$81.6 billion and a positive interest appropriation in the amount of R$40.5 billion.

According to the agency, July was marked by an environment of risk aversion abroad, reflecting uncertainties about inflation and growth in the world. However, after rising throughout the month with the external scenario and fiscal discussions in Brazil, the future yield curve ended July practically stable.

In the month, the average cost of the federal public debt stock fell, from 10.90% per year in June to 10.76% last month. In domestic debt, the cost of inventory rose slightly from 10.98% per year to 11.00% in July.

The average cost of new domestic debt issuances also grew moderately, going from 12.03% per year in June to 12.09% per year in July.

In the period, there was also a slight lengthening of the average maturity term of Brazilian bonds to 3.90 years, compared to 3.88 years recorded in June.

Regarding the liquidity cushion for payment of public debt, there was a reduction of 3.58% in July, to 1.178 trillion, due to the volume of redemptions in the month. The amount is still enough to pay off 9.49 months of bond maturities, a value considered comfortable – in June, it was 9.75 months.

POSITIVE AUGUST

For the month of August, the Treasury sees a more positive scenario, with an improvement in the prospects for domestic inflation and the market’s understanding that the monetary tightening cycle implemented by the Central Bank is nearing its end.

In the period, the future yield curve retreated, while Brazil’s CDS (credit default swap), which measures country-related risk, dropped 8.34%, to 258 basis points.

“This naturally favors Treasury issues. The Treasury has taken advantage of these positive moments of demand for [títulos] prefixed, with caution, to carry out their auctions”, said the general coordinator of Public Debt Operations of the National Treasury, Luís Felipe Vital.

Vital pointed out that the evaluation process of the Annual Financing Plan was concluded in August. According to him, the scenarios for the behavior of the federal public debt are in line with what was expected at the beginning of the year, with no need to make changes to the parameters.