UPDATE 1-Brazil’s public debt rises 0.05% in January as interest rates rise

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BRASILIA, Feb 23 (Reuters) – Brazil’s federal government debt rose 0.05% in January from December to 5.616 billion reais ($1.120 billion), the Treasury said on Wednesday. interest rates rising as the central bank tightens monetary policy to fight double-digit rates. inflation.

The average interest rate on federal domestic debt rose from 8.49% in December to 8.9% in January, the Treasury said, and the average rate on new domestic debt issued in the 12 months ending in January fell from 8.75% to 8.92%.

Luis Felipe Vital, head of Treasury debt management, told an online news conference that expectations of monetary policy tightening in the United States were affecting the long end of the domestic yield curve. , which saw increases of up to 75 basis points during the month.

The shorter end of the curve rose as much as 50 basis points, reacting to local indicators showing lingering inflationary pressures, leading the market to bet on further rate hikes in Brazil, Vital said.

He added that inflation-indexed bonds, which accounted for 30% of total government debt in January, have a higher cost of issue for the Treasury than bonds indexed to the benchmark interest rate, which represent 38.4% of total debt.

Brazil’s central bank raised the benchmark interest rate to 10.75% from its all-time high of 2% last March and signaled the need for further increases to fight inflation. Consumer prices rose 10.8% in the 12 months to mid-February, well above the government’s end-of-year target of 3.5%.

$1 = 5.0067 reais Reporting by Marcela Ayres; Editing by Bernard Orr

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