High volume of bond maturities drives Brazilian public debt decline
The high volume of maturing fixed-rate securities played a role in a slight decrease in the federal public debt in July. Figures released on Tuesday (Aug. 29) by the National Treasury show that it declined from BRL 6.191 trillion in June to BRL 6.142 trillion in July, marking a 0.8 percent drop.
Despite the July decline, the Treasury anticipates an upswing in the public debt in the upcoming months. As per the Annual Borrowing Plan, unveiled at the end of January, the federal public debt is projected to range between BRL 6.4 trillion and BRL 6.8 trillion by the close of 2023.
Reserve
Following an increase in June, the public debt reserve (a financial buffer used during turbulent times or periods of heavy concentration of maturities) experienced another decline in July, decreasing from BRL 1.118 trillion to BRL 991.85 billion. The primary driver, according to the National Treasury, was a substantial net redemption (redemptions minus issuances) prompted by the high volume of maturities in July.
Currently, this reserve can cover 8.28 months' worth of public debt maturities. Over the next 12 months, BRL 1.119 trillion in federal bonds are set to mature.
Debt Holders
Financial institutions remain the principal holders of the domestic federal public debt, holding a 29.2 percent share of the total. Investment funds, with 24.1 percent, and pension funds, at 23.1 percent, follow closely as significant debt holders.
The share of non-residents—i.e., foreigners—decreased from 9.5 percent in June to 9.2 percent in July, marking the lowest level since September of last year. Other groups account for a 14.3 percent share.
Through public debt instruments, the government borrows funds from investors to meet its financial obligations. In exchange, it commits to returning the funds after a specified period, often with adjustments linked to factors such as Brazil’s benchmark interest rate—the Selic—inflation, the dollar exchange rate, or predetermined fixed terms.
