Foreign capital in internal debt over record-breaking 20%

In spite of the volatility in the financial market over the last months, foreign investors are still interested in securities from the National Treasury. Last month, their share in the internal debt broke a record by reaching $165.6 billion in paper—20.38% of the domestic bond debt.

According to Coordinator General of Operations for the Public Debt Fernando Garrido, this shows foreign investors' confidence towards the Brazilian economy. “In October, no difficulties or rollover issues were observed. This was partly due to the participation of investors overseas,” he declared.

According to Garrido, foreigners prefer securities with medium or long terms, and the longer the term, the greater their trust that the National Treasury will be able to fulfill its commitments. Last month, 44.5% of international investments in internal debt securities targeted paper due in three years' time or more.

Although foreign investors' demand has not been shaken, the interest rates in the domestic debt securities reflected the instability of the country's economy in the last months. The securities due in October 2018, the market's most sought-after securities, paid an interest rate of 12.86% p.a. In November 20, which is above the 12.58% p.a. Rate paid at the auction held on October 2.

The coordinator tried not to associate the increase to the expectations over Rousseff's economic staff for her second term. However, he did acknowledge that the financial market is currently going through much instability. “Interest rates [of the public securities] are basically a reflection of the expectations of economic agents. The current situation and several economic factors interferes in how rates are fixed,” he said.

Translated by Fabrício Ferreira