Public Debt rises 2.95% in June and approaches BRL 6.2 trillion

In May, the indicator surpassed the BRL 6 trillion barrier for the first time. The Treasury forecasts that the FPD will rise in the coming months. According to the Annual Financing Plan (PAF), presented at the end of January, the FPD stock should end 2023 between R$ 6.4 trillion and R$ 6.8 trillion.

The Domestic Securities Public Debt (in securities) (DPMFi) rose 3.3%, rising from R$5.767 trillion in May to R$5.957 trillion in June. Last month, the Treasury issued BRL 145.326 billion more in securities than it redeemed, mainly in prefixed securities. The internal debt also rose due to the appropriation of R$ 44.93 billion in interest.

Through the appropriation of interest, the government recognizes, month by month, the correction of interest on securities and incorporates the value into the stock of public debt. With the Selic rate (basic interest rate of the economy) at 13.75% per year, the appropriation of interest puts pressure on government debt.

Last month, the Treasury issued BRL 151.145 billion in DPMFi bonds. With the low volume of maturities in June, redemptions totaled R$ 5.818 billion. The difference between issues and redemptions was the largest since December 2020, when the financial market began to recover from the most acute phase of the covid-19 pandemic.

On the external market, the strong drop in the dollar in June reduced the government’s indebtedness. The External Federal Public Debt (DPFe) fell 1.8%, from R$ 246.78 billion in May to R$ 234.04 billion in June. The main factor was the fall of 5.43% of the US currency last month.

Mattress

After falling in May, the public debt cushion (financial reserve used in times of turbulence or a strong concentration of maturities) fell again in June. This reserve went from R$1.053 trillion in May to R$983 billion last month. The main reason, according to the National Treasury, was the high net issuance (issuances minus redemptions) motivated by the low volume of maturities in June.

Currently, the mattress covers 8.52 months of public debt maturities. In the next 12 months, the maturity of R$ 1.221 trillion in federal securities is expected.

Composition

The low volume of maturities changed the composition of the FPD. The proportion of papers indexed by basic interest fell slightly, from 39.74% in May to 39.52% in June. The PAF predicts that the indicator will close 2023 between 38% and 42%. This type of paper has once again attracted the interest of buyers due to the recent increases in the Selic Rate, but the percentage may drop in the coming months due to the expected reductions in basic interest rates in the economy.

The share of fixed-rate securities (with yield defined at the time of issuance) increased, from 26.17% to 27.04%. The PAF predicts that the share of the Federal Public Debt corrected by this indicator will end the year between 23% and 27%.

In recent months, the Treasury has again launched more fixed-rate securities, due to the lessening of the turbulence in the financial market. These bonds are in greater demand in times of economic stability.

With low maturities this month, the share of inflation-adjusted securities in the DPF fell slightly, changing from 29.76% to 29.46%. The PAF predicts that inflation-linked bonds will end the year between 29% and 33%.

Composed of old domestic debt securities indexed in dollars and the external debt, the weight of the exchange rate in the public debt increased from 4.33% to 3.99%. The public debt linked to the exchange rate is within the limits established by the PAF for the end of 2023, between 3% and 7%.

holders

Financial institutions continue to be the main holders of the internal Federal Public Debt, with a 29.2% share in the stock. Investment funds, with 24.3%, and pension funds, with 22.7%, appear next in the list of debt holders.

The participation of non-residents (foreigners) dropped slightly, changing from 9.6% in May to 9.5% in June. The percentage remains lower than in February, when the share of foreigners in the public debt was 9.8%. The other groups account for 14.4% of participation.

Through public debt, the government borrows money from investors to honor financial commitments. In exchange, it undertakes to return the resources after a few years, with some correction, which can follow the Selic rate (basic interest rate of the economy), inflation, the dollar or be prefixed (set in advance).