Brazil September debt issuance second highest on record

By Jamie McGeever

BRASILIA, Oct 27 (Reuters) - Brazil's government registered its second biggest month of borrowing on record in September, Treasury said on Tuesday, while the average cost of servicing debt issued in the year to September fell to an all-time low.

Brazil's federal public debt rose 2.59% from the month before to 4.53 trillion reais ($800 billion), while the total domestic debt stock rose 2.56% to 4.28 trillion reais, Treasury said.

With the government borrowing large amounts to fund its pandemic-fighting emergency support and income transfer programs, Treasury said it issued 155.3 billion reais of debt in the month and, after redemptions, a net 80.7 billion reais.

Both were the second highest on record after July this year, Treasury said. Some 88% of that was in fixed rate debt, in maturities of six and 12 months to meet investor demand for shorter-term, less risky borrowing.

This means Brazilhas now issued more debt in the first nine months of this year, 798.3 billion reais, than the whole of last year, Treasury said.

The average interest rate on domestic debt issues in the 12 months to September fell to a new all-time low of 4.64%, Treasury said, while the average cost of servicing the overall debt stock ticked up to 8.72% from 8.54%.

The Brazilian interest rate curve steepened sharply in September, with short-term borrowing costs anchored by the central bank lowering its benchmark Selic rate to a record low of 2.00%, and growing angst over Brazil's fiscal outlook pushing up longer-term rates.

The spread between January 2022 and January 2027 interest rate futures widened to a record 465 basis points, but has since come back to around 400 bps.

The average maturity of new domestic debt issued in the 12 months to September fell to a new all-time low of 2.09 years from 2.36 years in August, Treasury said.

($1 = 5.66 reais)

(Reporting by Jamie McGeever and Marcela Ayres Editing by Chris Reese and Richard Chang)

((jamie.mcgeever@thomsonreuters.com; +55 (0)11 97189 3169; Reuters Messaging: jamie.mcgeever.reuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.