Brazil sold just over 18 billion reais ($3.2 billion) of short-term debt on Thursday, its biggest sale of the year and part of the government’s strategy of borrowing at the short end of the curve, Treasury Secretary Mansueto Almeida said on Friday.
Speaking in an online event hosted by business group Lide Pernambuco, Almeida said the Treasury aims to maintain Brazil’s average debt maturity profile at just over four years as it ramps up borrowing to fund emergency spending measures.
Almeida said Thursday’s auction was mostly made up of fixed rate 6-month paper sold at 2.58%, and a 6-year LFT floating rate note tied to the central bank’s benchmark Selic rate, which is currently 3.0.
“We are selling more short-term debt. Even before the crisis purchases of bonds of 10 years or longer from pension funds and foreign investors were declining,” he said.
Earlier on Friday, the Economy Ministry revised its deficit and debt forecasts to record levels in light of the hit to revenues and need for crisis-fighting fiscal measures during the coronavirus crisis.
Almeida also said that ‘printing money’, essentially funding the government’s deficit spending by newly-created money from the central bank, and zero interest rates, would risk debasing the currency.
“Unfortunately, Brazil is not like other (developed) countries where if rates fall to zero investors still have confidence in the currency,” Almeida said.
“Financing the deficit by printing money does not work in Brazil, and in my opinion, is very dangerous,” he said, echoing comments on this subject made earlier on Friday by central bank director Fabio Kanczuk.
While borrowing and debt are rising, Brazil’s interest payment bill this year will be lower than last year due to the record low Selic rate, Almeida said.