Brazil’s rate on new public debt issues hits 3-year high


BRASILIA, Dec.22 (Reuters) – Brazil’s rate on new domestic debt issuance rose in November to its highest level since August 2018, the Treasury said on Wednesday, as the central bank leads a round of monetary tightening aggressive to keep double-digit inflation under control.

The average rate on new local debt issued in the 12 months to November rose to 8.02% from 7.48% the previous month, while the average rate on outstanding domestic federal debt fell from 8 , 29% to 8.52%.

Brazil’s benchmark interest rate ended November at 7.75%, but the central bank raised it to 9.25% earlier this month and has already signaled another 150 basis point hike in February. Read more

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The bank has pledged to do everything in its power to curb inflation which hit 10.74% in the 12 months leading up to November, driven by a weaker currency, severe drought and fuel prices higher.

“In the domestic market, we are living a cycle of rising interest rates and this affects the statistics of the cost of debt”, said Luis Felipe Vital, head of debt management, at a press conference in line.

Despite the outlook for even higher interest rates in 2022, which will put additional pressure on debt issuance rates, Vital stressed that decelerating inflation should bring some relief to the government.

Bonds linked to the benchmark interest rate represented 36.69% of total public debt in November, with inflation-linked bonds representing 29.32%.

Brazil’s federal government debt rose 2.34 percent in November from the previous month to 5,499 billion reais ($ 966.38 billion), the Treasury said on Wednesday, adding that the total stock of debt domestic had climbed 2.48% to 5,233 billion reais.

($ 1 = 5.6903 reais)

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Report by Marcela Ayres; Editing by Stephen Eisenhammer and Andrea Ricci

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