20181030-法国巴黎银行-Brazil__Non-residents__share_of_local_public_debt_remains_stable_11页_470kb

Brazil: Non-residents' Share of Local Public Debt Remains Stable (October 30, 2018)

Core Content Overview

This report provides an analysis of Brazil's public debt structure, focusing on the share held by non-residents, the maturity schedule, and the cost of debt. It also includes insights into the portfolio allocation of Brazilian private pension funds and outlines legal and regulatory disclosures.

Key Points

• Non-residents' Share of Public Debt:
  As of September 2018, non-residents held BRL424bn (~USD105bn), representing 11.7% of Brazil's total public debt.
  This share remained stable, despite BRL7bn (~USD1.1bn) outflows in Q3 2018.
  Non-residents' holdings are equivalent to 27.5% of Brazil's international reserves (currently USD381bn).

• Public Debt Exposure:

  • Nominal Rates: Current exposure is USD65mn DV01, with a monthly decay of USD2mn DV01.
  • Real Rates (Inflation-linked bonds): Exposure is estimated at USD198mn DV01, with a near-zero monthly decay due to high convexity.
  • Exposure is concentrated in Jan-23, Jan-25, Jan-27 bonds for nominal rates and Aug-50 for real rates.

• Maturity Schedule for Next 12 Months:
  The next major maturity is BRL138bn (~USD37bn) in January 2019.
  The National Treasury (BNT) is in a comfortable position to roll over the debt stock.

• Annual Borrowing Plan:
  The BNT has kept most debt metrics within the 2018 annual borrowing plan limits.

  • Floating rate securities limits were adjusted upward to 33-37% from 31-35%.
  • Fixed rate bonds and inflation-linked bonds are expected to maintain their original limits.

• Average Cost of Debt:
  The average cost of domestic public debt was 9.78% as of the latest data.
  Projections suggest this cost will likely fall to 8.90% by September 2019, driven by declining inflation expectations.

• Private Pension Fund Portfolio Allocation:

  • Total assets under management (AUM) for Brazilian private pension funds (EFPC) amounted to BRL810bn.
  • Fixed income accounted for 74% of total AUM in May 2018, while public debt made up 18%.
  • FI funds and public debt were the main contributors to portfolio growth.
  • Foreign investments remained at 0% of total AUM.

• Portfolio Breakdown Changes:

  • Structured investments decreased as a percentage of total AUM.
  • Equity and real estate holdings saw modest changes.
  • Private debt and emerging companies had smaller shares and lower growth.

Summary of Key Metrics

Legal and Regulatory Disclosures

• This document is a marketing communication and not investment research under MiFID II.
• It may contain "Research" as defined under MiFID II unbundling rules, intended for specific firms.
• BNPP may have conflicts of interest and may engage in transactions inconsistent with the views expressed.
• Options and ETFs discussed are complex and may not be suitable for all investors.
• Non-US persons and QIBs may be eligible to purchase certain restricted securities.
• This report may be distributed only to institutional investors by BNPP Securities Corp. or its affiliates.

Conclusion

The report highlights that Brazil's public debt structure remains stable, with non-residents maintaining a consistent share. The maturity schedule indicates manageable debt rollover, and the cost of debt is expected to decline. Private pension funds continue to allocate a significant portion of their AUM to fixed income and public debt, with a focus on domestic instruments. Legal notices emphasize the non-research nature of the document and potential conflicts of interest.