Brazil To Return To Global Bond Market This Year

• Brazil plans to return to international debt markets later this year after successful issuances in the first half, Treasury Secretary Rogerio Ceron said in an interview last week, adding that a new sustainable bond is also under consideration.
• Latin America's largest economy raised $2.5Bn in dollar-denominated sovereign bonds in February and $2.75Bn in June. The last time Brazil conducted more than two sovereign bond sales abroad in a single year was in 2014.
• Ceron acknowledged investor concerns over the country's rising public debt but noted that similar trends are playing out across major economies. Amid a global reallocation of assets driven by shifts in U.S. economic policy, he said Brazil stands out due to its high share of local-currency debt and elevated real interest rates, an increasingly attractive combination as inflation eases.
• These factors, he said, have fueled strong capital inflows, reflected in a currency that has gained more than 10.0% this year, rising corporate bond issuances, more foreign participation in public debt markets and gains in local equities.
• "There's a significant interest rate differential and a macro environment that makes sharp currency depreciation unlikely, since capital is flowing in. So, it's almost a perfect window for non-resident investors to allocate funds here and benefit," Ceron said. With debt rollovers running at about 140.0% of maturities, well above the historical average around 100.0%, Brazil's Treasury has ramped up domestic issuance, mainly to capitalise on what Ceron called "a great moment" in the market, while also preparing for potential volatility ahead of the 2026 election.
• Of note, amid a dispute between the government and Congress over a decree raising the IOF^[1] tax levied on some financial transactions, the secretary defended the measure as essential to meeting next year's fiscal target. He also stressed the need for congressional approval of an executive measure to harmonize income tax rates on financial investments and impose a 5% levy on currently tax-exempt debt securities.

(Source: Reuters)

^[1] The Tax on Financial Operations (IOF), is a levy imposed on individuals and legal entities for various financial transactions conducted within Brazil. The IOF rate varies depending on the specific transaction, and its payment is mandatory.