20151030-法国巴黎银行-Brazil__Currency_swaps_–_Increasing_maturities_14页_227kb

Brazil: Currency Swaps – Increasing Maturities Summary

Core Content

The Brazilian Central Bank (BCB) has made several announcements and adjustments regarding its USD currency swap operations, which are aimed at managing the foreign exchange market and adjusting the maturity structure of its swap contracts. These changes reflect the BCB's strategy to reduce market concentration and improve the absorption of rollover amounts.

Main Points

• Rollover of USD 606mn: The BCB announced that it would rollover USD 606 million today, with the assumption that this amount will remain constant until the end of the next month.
• Full Rollover of December Contracts: Assuming the USD 606mn remains constant, 100% of the USD 10.9 billion in contracts maturing in December will be rolled over.
• Extension of Tenors: The BCB has expanded the number of tenors for currency swap auctions from two to three, with the new tenors being May16, Jul16, and Sep16. This change was likely a response to market demands for more diversified maturity dates.
• Limit on FX Swaps: The BCB has maintained a USD 10-11 billion limit on FX swaps maturing in each tenor to prevent large daily rollovers. This suggests a controlled approach to managing the USD position on derivatives.
• Support for Local USD Rates: The adjustments in the maturity structure are expected to support the local USD rate curve, particularly the "belly" of the curve (spread over Libor), to adjust upwards. The report continues to recommend paying rates in cupom cambial Jan18 (SoL), as local USD rates are currently at low levels.

Key Information

• Table 1: Provides the USD sold via currency swaps by the BCB for various periods, including amounts and average PTAX rates. The data indicates the BCB's active management of USD supply and demand.
• Table 2: Outlines the currency swap maturity schedule, showing the amount expiring and the outstanding USD position on derivatives for different dates. This table illustrates the gradual reduction of USD positions over time, with some notable spikes and declines.
• Table 3: Contains a detailed list of BCB currency swap auctions, including dates, PTAX rates, amounts sold, and the outstanding USD positions. This table shows a consistent pattern of small amounts sold with varying PTAX rates, indicating a strategy of controlled and incremental intervention.

Charts

• Chart 1: Depicts the BCB's short USD position on derivatives, showing a fluctuating trend that may be influenced by the swap operations.
• Chart 2: Illustrates the currency swap maturity schedule in USD billion, highlighting the distribution of expirations and the BCB's efforts to manage the USD curve.

Conclusion

The BCB's decisions on currency swaps are part of a broader strategy to manage the foreign exchange market effectively. By increasing the number of tenors and maintaining limits on FX swaps, the BCB aims to avoid excessive concentration and facilitate smoother market absorption. These actions are expected to have a positive impact on the local USD rate curve, particularly in the middle part, and the continued recommendation to pay rates in cupom cambial Jan18 (SoL) underscores the current favorable conditions for local USD rates.