巴黎银行-新兴市场-宏观策略-巴西：地方公共债务中的非居民所占份额进一步增加-20190328-10页.pdf

1 28 March 2019 Brazil:A further increase in non-residents share of local public debt Non-residents share of local public debt remains stable The latest data released by the Ministry of Finance show non-residents share of Brazilian local public debt increased by 5%(BRL 22bn)this February,now at BRL455bn(USD121bn).Inflows from non-residents amounted to BRL 21.5bn(USD5.7bn).Table 1 and Figs.1-4:Breakdown of public debt Sources:Bloomberg LLP,Brazils Ministry of Finance(Ministrio da Fazenda),BNP Paribas BRL(bn)Feb-19m/m%y/y%Jan-19Feb-18Domestic Public Debt3,732%of Total2%8%3,669%of Total3,457%of TotalFinancial Institutions82522.1%2%9%80722.0%75922.0%Local Funds1,01627.2%2%8%99327.1%94527.4%Pension Funds91624.6%0%9%91825.0%84424.4%Non-residents45512.2%5%6%43311.8%42812.4%Government Institutions1544.1%1%1%1534.2%1524.4%Insurance Companies1564.2%0%17%1564.2%1343.9%Others2105.6%0%8%2095.7%1935.6%Public Debt HoldingsPublic Debt Holdings by Foreigners(%)43.6%48.2%3.8%3.7%0.7%Fixed-rate coupon bonds(NTN-F)Fixed-rate bullet bonds(LTN)Inflation-linked bonds(NTN-B)Floating-rate BondsOthers22.1%27.2%24.6%12.2%4.1%4.2%5.6%Financial InstitutionsLocal FundsPension FundsNon-residentsGovernment InstitutionsInsurance CompaniesOthers11%14%17%20%250 350 450 550Jan-15Dec-15Nov-16Oct-17Aug-18Foreigners participation in Brazilian local debt(BRL bn)Foreigners participation in Brazilian local debt(%,RHS)(20)(10)-10 20 30Jan-15Dec-15Nov-16Oct-17Aug-18Monthly Foreigners Flows(BRL,bn)LATIN AMERICA STRATEGY Please refer to important information at the end of the report FOCUS EMERGING MARKETS|LATAM 28 February 2019 Samuel Castro EM/Latam Strategist+55 11 3841 3492 Andre Digiacomo EM/Latam Strategist +55 11 3841 3445 Luca Maia EM/Latam Strategist+55 11 3841 3447 Banco BNP Paribas Brasil S.A.KEY MESSAGES Non-residents share of Brazilian local public debt increased by 5%m/m this February.Inflows from non-residents amounted to BRL21.5bn(USD5.7bn),according to the latest data released by the Ministry of Finance.Our calculations suggest the current public debt exposure for nominal rates is USD60mn DV01,and the monthly decay is USD1.8mn.Public debt exposure for real rates(inflation-linked bonds)is estimated at USD220mn DV01.We have updated our local macro fund positioning model,which suggests local macro hedge funds are still bullish on Brazilian assets,except for BRL,which is neutral.2 28 March 2019 Non-residents share of total public debt increased slightly to 12.2%,representing 32%of international reserves(currently at USD378bn).Public debt duration According to our calculations,current public debt exposure to nominal rates is USD60mn DV01 and its monthly decay is USD1.8mn DV01(Fig.6).Nominal rate exposure is concentrated in the Jan-23,Jan-25 and Jan-27 bonds(Fig.5).Public debt exposure to real rates(inflation-linked bonds)is estimated at USD209mn DV01(Fig.7).The monthly decay for real rates is close to 0,given the high convexity of these bonds.Real rate exposure is concentrated in the Aug-50 bond,with USD64.4mn DV01(Fig.8).Figs.5-8:Public debt exposure by maturity(USD DV01,mn)Sources:Bloomberg LLP,Brazils Ministry of Finance(Ministrio da Fazenda),BNP Paribas Maturity schedule for the next 12 months The next large maturity will be in April 2019 when BRL120bn of fixed-rate bonds mature(USD31bn at current FX rate).Brazils National Treasury(BNT)appears to be in a comfortable position to roll over the debt stock in the next 12 months.Fig.9:Maturity schedule by bond type(local debt,BRL bn)Sources:Bloomberg LLP,Brazils Ministry of Finance(Ministrio da Fazenda),BNP Paribas Annual borrowing plan guidelines The BNT expects to maintain its long-term guidance for floating rate bonds to be replaced by fixed rate and inflation-linked instruments.In the short term,however,it expects to increase the share of LFTs(see:Brazils annual borrowing plan further drop in share of fixed-rate bonds,published on 30 January 2019).Brazils public debt last month continued to be in line with the guidelines of the 2018 annual borrowing plan and showed a stronger profile than the 2019 guidelines.0.00.31.21.62.05.01.44.10.84.04.33.410.09.410.12.5036912Apr-19Jul-19Oct-19Jan-20Apr-20Jul-20Oct-20Jan-21Apr-21Jul-21Jan-22Jul-22Jan-23Jan-25Jan-27Jan-29Current market nominals exposure per maturity(USD DV01,mn)0.20.10.20.10.10.30.10.20.00.10.10.10.20.10.10.00.000.070.140.210.28Apr-19Jul-19Oct-19Jan-20Apr-20Jul-20Oct-20Jan-21Apr-21Jul-21Jan-22Jul-22Jan-23Jan-25Jan-27Jan-291 month nominals DV01 decay(USD DV01,mn)0.22.13.711.18.2 7.67.42.08.022.017.035.964.418.8015304560May-19Aug-20May-21Aug-22May-23Aug-24Aug-26Aug-28Aug-30May-35Aug-40May-45Aug-50May-55Current market reals exposure per maturity(USD DV01,mn)0.10.10.10.20.10.10.00.00.00.00.0-0.1-0.2-0.1(0.30)(0.15)0.000.150.30May-19Aug-20May-21Aug-22May-23Aug-24Aug-26Aug-28Aug-30May-35Aug-40May-45Aug-50May-551 month reals DV01 decay(USDDV01,mn)-30 60 90 120 150Apr19May19Jun19Jul19Aug19Sep19Oct19Nov19Dec19Jan20Feb20Mar20Apr20Maturity Schedule by bond type for the next 12 months(BRL,bn)ESP.(Other)NTN-C(Inflation linked)NTN-B(Inflation linked)LFT(Floating rate)LTN/NTN-F(Fixed rate)3 28 March 2019 The BNT expects convergence to 2019 guidelines to take place throughout the year.The metrics outside the goals are:the share of floating-rate bonds(lower than expected),the percentage of debt maturing in 12 months(lower than expected)and the average maturity(higher than expected).The larger share of floating rate bonds will be the result of a small volume of LFTs maturing,rather than an increase in bond issuance.The average maturity(duration)of public debt previously decreased in the short term,after reaching its peak in 2015 due to the lower share of inflation linked bonds.The BNT expects a reversal of this trend if the process of fiscal consolidation accelerates.Figs.10-15:Annual borrowing plan guidelines Sources:Bloomberg LLP,Brazils Ministry of Finance(Ministrio da Fazenda),BNP Paribas Average cost of debt The cost of domestic debt has decreased due to:(1)the low monetary policy rate;and(2)the convergence of inflation and credit risk premium to lower levels.The latest average cost(12-month cumulative)released by Brazils Ministry of Finance was 9.32%.To get a better sense of the cost of domestic public debt in the next 12 months,we used the official forecasts of BNP Paribas economists for IPCA inflation and the Selic rate,and our projections for USDBRL.We then factored these projections into the stock of LFTs,LTNs,NTN-Fs and NTN-Bs.The results suggest that the cost of domestic public debt will fall to 8.99%in February 2020 from 9.32%currently(grey-shaded area,red bullet point in Fig.16 and Table 2).Fig.16 and Table 2:Average cost of domestic debt and 2019 debt limits Sources:Bloomberg LLP,Brazils Ministry of Finance(Ministrio da Fazenda),BNP Paribas 20%25%30%35%40%45%20062008201120132016201810%17%24%31%38%45%2006200820112013201620182%5%8%11%14%17%20062008201120132016201813%18%23%28%33%38%20062008201120132016201814%18%22%26%30%34%2006200820112013201620183439444954200620082011201320162018Public Debt-FIXEDPublic Debt-Indexed to SELICPublic Debt-Indexed to FXPublic Debt-Indexed to INFLATION%of debt due in 12-monthsAverage Maturity(in months)MinMaxReferenceIntervalStock of FPD(BRL bn)3,873.54,100.04,300.0-Composition(%)Fixed Rate31.329.033.040.0+/-2.0Inflation Linked27.924.028.035.0+/-2.0Floating Rate37.038.042.020.0+/-2.0Exchange Rate3.83.07.05.0+/-2.0Maturity Structure%Maturing in 12m15.617.020.020.0+/-2.0Average Maturity(in years)4.13.94.15.5+/-0.520182019 LimitsLong Term LimitsFeb-19,9.32 Feb-20,8.99 6 8 10 12 14 16Dec-10Jun-12Dec-13Jun-15Dec-16Jun-18Dec-19(%)Average Cost of Domestic Public DebtLFTLTNNTN-BNTN-FAvg.Cost of DPD 4 28 March 2019 ANNEX:Local funds technical positioning We have updated our local macro fund positioning model,which suggests that local macro hedge funds are still bullish on all Brazilian assets.Allocations in Brazilian risk assets had peaked by the end of December last year,but remain near that level.Although there has been a decrease in long equity and long BRL positions,overall local funds leverage index has remained at similar levels over Q1 2019(Figures 17-18),as DI receiver positions have increased in the last two months.The biggest highlight in our view for local fund positioning is the BRL position that is close to neutral.Funds have consistently reduced their long BRL positions since February.From a broader perspective,according to our Latam FX position monitor,the overall market position in the Brazilian real is currently short BRL(please see:BNPP-EM FX positioning Latam and CEEMEA).Figs.17-20:Local funds technical positioning Sources:Bloomberg LLP,BNP Paribas To gauge Brazilian local funds risk asset allocation,we used optimisation tools to extract the drivers behind their average return.We chose 46 local macro funds,which together manage BRL125bn,as a way to proxy the domestic macro fund industrys performance.For a full explanation of our methodology,please refer to our initial publication Brazil:Introducing a technical position model,published on April 2017.-1%9%19%29%39%May-16Nov-16May-17Nov-17May-18Nov-18Local funds leverage indexBearish Brazilian Risk AssetsBullish Brazilian Risk AssetsEnd of impeachment processTrump electedTemer TantrumPresidential election-1%5%11%17%23%Jul-18Sep-18Oct-18Dec-18Jan-19Mar-19Local funds leverage indexBearish Brazilian Risk AssetsBullish Brazilian Risk Assets-12%-3%6%15%24%May-16Oct-16Mar-17Aug-17Jan-18Jun-18Nov-18Brazils DI WeightBrazils BRL WeightBrazils equity WeightForeign Assets WeightShort allocation(in the case of DI,paying rates)-7%-2%3%8%13%Jul-18Sep-18Oct-18Nov-18Jan-19Feb-19Brazils DI WeightBrazils BRL WeightBrazils equity WeightForeign Assets WeightShort allocationLong allocation(in the case of DI,receiveing rates)ZoomZoom LEGAL NOTICE This document has been written by our Strategist and Economist teams within the BNP Paribas group of companies(collectively“BNPP”);it does not purport to be an exhaustive analysis,and may be subject to conflicts of interest resulting from their interaction with sales and trading which could affect the objectivity of this report.This document is non-independent research for the purpose of the UK Financial Conduct Authority rules.For the purposes of the recast Markets in Financial Instruments Directive(2014/65/EU)(MiFID II),non-independent research constitutes a marketing communication.This document is not investment research for the purposes of MiFID II.It has not been prepared in accordance with legal requirements designed to provide the independence of investment research,and is not subject to any prohibition on dealing ahead of the dissemination of investment research.The content in this document/communication may also contain“Research”as 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