Market Dynamics in International Capital Markets for Sovereign Debt Sovereign Debt Management Forum December 3 rd – 4 th , 2014 Otavio Ladeira de Medeiros Brazilian National Treasury
Recent Evolution - Overall Public Debt and External Public Debt Jan-06 BRL 2.05% Yen 1.60% 0.84% USD Contractual 57.02% 14.44% 19.25% 84.71% Domestic Debt - Bradies held by Residents 9.53% Euro Domestic Debt - 10.54% held by Non Residents Oct-14 External Debt BRL 13.04% 19.39% Contractual USD 9.19% 4.85% 72.34% Euro 5.43% 75.76% 2 Source: National Treasury.
External Debt Strategy and Results External Debt yield curve, outstanding volumes and buyback program (US$ bn) 8.0% 6.0% 4.0% 4.0 2.0% Yield % p.y 0.4 4.1 2.1 0.3 0.5 0.4 0.8 0.0% 3.6 1.0 1.3 1.1 4.3 3.0 2.5 0.7 2.2 1.2 2.1 2.2 -2.0% 1.9 1.7 1.4 1.5 0,7 0.8 1.1 1.0 1.0 0.8 0.4 0.4 0.1 0.2 -4.0% 7.875% 15 6.00% 17 A-Bond 8.00%* 8.875% 19 5.875% 19 N 12.58% 20 4.875% 21 2.625% 23 8.875% 24 B 8.875% 24 4.250% 25 8.75% 25 10.125% 27 12.25% 30 8.25% 34 7.125% 37 11.00% 40 C15** 5.625% 41 5.00% 45 - - Outstanding Issuances - Benchmarks Buyback Yield % p.y. (Jul/14) Source: National Treasury Notes: *For the A-Bond (BR 8.00 01/15/2018), the reduction in the outstanding value includes not only the amount repurchased trough the Buyback Program but also US$ 184.5 million of amortization. **Global 2040- callable in 2015. 3
Enhancing the external public debt profile … Impact of the “Cleaning Up” on the Federal Government External Debt (US$ bn) Buyback Face Value 1 Program 2 2006 6.0 2007 5.4 2008 1.2 2009 1.1 2010 3.2 2011 2.3 2012 1.4 2013 3.3 2014 0.6 Total 24.4 1 Captures the impact of the operations on the outstanding public debt. 2 The Program started in 2006. Between 2006 and 2013, US$ 24 billion in securities were repurchased, at face value. 4
External Debt Market Important insights on External Debt Management » External Debt Strategy consistent with debt management long term objectives: optimum debt composition defines that external debt (in hard currency) should not be higher than 5% of the overall debt » Legal aspect: Senate Resolution authorizes the Treasury to operate with flexibility: accountability after issuances » External Debt Desk guarantees the external markets monitoring on a continuous basis and permits a regular “counterpoint” to banks proposals » League Table with 14 dealers (being 7 the most effectives): » DMO receives weekly from each dealer a report about market conditions and a proposal for issuance » Issuance: turnover between banks, based on the league table » Plain vanilla issuances done in a single day » one day before the possible issuance day: conditional mandate to a bank (or banks) » issuance day (very early): go-non-go call » all procedures done remotely: less bureaucracy, more agility and flexibility » Book building: issuer has an effective hole in the investor base allocation process Result: qualitative external issues with precise objectives and positive outcomes 5
For additional information access the National Treasury website: www.tesouro.fazenda.gov.br Or contact Institutional Relations area: brazildebt@fazenda.gov.br The information on this presentation is issued by the Brazilian Debt Management Office (DMO) for informational purposes. It does not contain and is not an invitation or offer to buy or sell securities. Translation of the original text of this document is provided only for the convenience of the reader. While reasonable care has been taken to ensure the authenticity of the translation, its accuracy cannot be guaranteed. Reliance upon this translation shall be at the reader's own risk. Under no circumstances, shall the Brazilian National Treasury, its officers, employees or agents be liable to the reader or anyone else for any inaccuracy, error, inconsistency, omission, deletion, defect or alteration of the content of the translation from the original Portuguese text, regardless of cause, or for any damages resulting therefore. The original Portuguese text of this document is the only official version , which can be found in http://www.stn.fazenda.gov.br/index.asp. In the event of any discrepancy or contradiction between the Portuguese and translated version, the Portuguese version shall prevail. 6
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