Foreigners reduced holdings of Brazilian bonds: market turmoil and political uncertainty
Foreigners reduced their holdings of Brazilian bonds in April to the lowest since 2009, the figures showed on Wednesday, against the backdrop of growing turmoil in the financial markets fueled by the coronavirus crisis and domestic political uncertainty.
Non-residents reduced their assets by 24.3 billion reais ($ 4.6 billion) in the month, bringing the total reduction so far this year to more than 56 billion reais and nearly 100 billion in the past 12 months, showed a presentation of the Treasury.
Luis Felipe Vital, public debt manager at the Treasury, says non-residents now hold only 9.4% of Brazil’s domestic federal debt, the lowest since December 2009, when they held 8.8 % of the total.
With Brazil’s federal domestic debt rising to 3.994 billion reais in April, non-resident assets amounted to around 370 billion reais.
The figures corroborate central bank data released on Tuesday, which showed an exit of nearly US $ 5 billion from the Brazilian debt markets in April, which followed a larger exit rush in the previous month.
The Treasury said the coronavirus epidemic fueled demand for short-term fixed rate bonds in April and hampered its ability to issue debt. But Vital said conditions were much better this month.
“Throughout the month of May, the global situation has improved and Treasury issues so far this month have been significantly higher,” said Vital. Brazil has adequate liquidity buffers and its cash position will be strengthened by the May net issues, he said.
Treasury Secretary Mansueto Almeida said last week that Brazil sold just over 18 billion reais in short-term debt on Thursday, its biggest sale of the year.
The Treasury also said on Wednesday that the average cost of servicing Brazil’s federal debt fell to an all-time high of 8.03% in April. This debt level decreased by 1.28% in April to reach 4.16 trillion reais from the previous month.