By Jamie McGeever
BRASILIA (Reuters) – The cost to Brazil’s government of servicing its ballooning domestic debt fell to an all-time low in August, official figures showed on Monday, following the drop in official interest rates and a dramatic shortening of the debt profile.
The average cost of servicing the wider public debt load fell to its lowest in a year, Treasury figures showed, as the average interest rate on debt issued in the 12 months to August also fell to the lowest on record.
The average rate of interest on the domestic federal debt stock fell to 7.3% in August from 7.4% in July, the Treasury said, while the average cost of servicing the wider federal public debt load fell to 8.54% from 8.73%.
The average rate of interest on new domestic debt issued in the 12 months to August fell to 4.85% from 5.13% in the 12 months to July, Treasury said. Barely four years ago, this figure stood at 14.5%.
The Brazilian interest rate curve has steepened sharply in recent weeks, with short-term borrowing costs anchored by the central bank lowering its benchmark Selic rate to a record low of 2.00%, and growing worries over Brazil’s fiscal outlook pushing up longer-term rates.
Treasury Secretary Bruno Funchal told Reuters last week that the curve steepening was a “warning” that Brazil has “no room for error” in getting its record debt and deficit back under control.
As investors cut back on risk and lend to Brazil for shorter time frames, the average maturity of new domestic debt issued in the 12 months to August fell to a new all-time low of 2.36 years from 3.15 years in July, Treasury figures showed.
At the end of last year, that was over 4 years.
Brazil’s overall public debt rose 1.56% in August to 4.41 trillion reais ($768 billion) from the month before, while the total domestic debt stock rose 1.35% to 4.18 trillion reais, Treasury said.
(Reporting by Jamie McGeever and Marcela Ayres; editing by Jonathan Oatis and Bernadette Baum)
