BRAZIL – Foreigners reduced their holdings of Brazilian bonds in April to the lowest level since 2009, figures on Wednesday showed, against a backdrop of increasing financial market turmoil triggered by the coronavirus crisis and domestic political uncertainty.
Non-residents reduced their ownership by 24.3 billion reais ($ 4.6 billion) that month, bringing the total reduction so far this year to more than 56 billion reais and to nearly 100 billion over the past 12 months, according to the Treasury presentation .
Non-residents now hold only 9.4% of Brazil’s federal domestic debt securities, the lowest since December 2009 when they hold 8.8% of the total, according to Luis Felipe Vital, manager of public debt at the Ministry of Finance.
With Brazilian federal domestic securities debt in April reaching a total of 3.94 trillion reais, non-resident holdings totaled around 370 billion reais.
These figures support central bank data published on Tuesday which showed an outflow of nearly $ 5 billion from the Brazilian debt market in April, which followed a bigger invasion to exit the previous month.
Treasury said that the coronavirus outbreak triggered demand for fixed interest rates, short-term bonds in April and hampered its ability to issue debt. But Vital said this month’s condition was much better.
“Throughout May the global picture is getting better and the issuance of Treasury this month is much higher,” Vital said. Brazil has sufficient liquidity buffer and its cash position will be strengthened by the May net issuance, he said.
Finance Minister Mansueto Almeida said last week that Brazil sold more than 18 billion reais of short-term debt on Thursday, the biggest sale this year.
The Ministry of Finance also said on Wednesday that the average cost of servicing Brazil’s federal debt fell to a record low of 8.03% in April. The debt burden fell 1.28% in April to 4.16 trillion reais from the previous month.
(Reporting by Jamie McGeever and Marcela Ayres; editing by Grant McCool)
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