by Tatiana Bautzer
SAO PAULO (Reuters) – Brazil’s investment banks have been focusing on bond issuance in the third quarter, with activity in the area remaining strong even with higher interest rates.
Felipe Thut, director of the investment bank Bradesco BBI controlled by Banco Bradesco SA, expects the total issuance of local debt to reach about 430 billion reais ( $59 billion) this year. From January to August, the circulation increased by 30% year-on-year. “The amount of debt issued in reais right now is about twice the 96 level, even though interest rates are much higher than we were at the time,” Thut added.
Local fixed income bonds accounted for 96% of activity in Brazil’s capital markets in August, even as benchmark interest rate Selic reached .59%, higher than 2022.
Equity issuance down this year 59.5% According to Refinitiv data, mergers and acquisitions The transaction volume was also % lower than the same period last year. Uncertainty related to the presidential election is affecting trading, as well as volatility in global interest rates.
Large inflows of local funds into fixed foreign exchange portfolios are driving demand for private debt, Thut added. Fixed Income Funds in
Net inflows 96 billions of reais to July.
Another factor was higher-than-expected growth this year, prompting companies to issue debt to finance expansion, the figure said.
Lower cost tax-exempt bonds for infrastructure, real estate, or agribusiness have been preferred by businesses, close to 20 billion reais in the first five months of 2022.
The executive believes that once it becomes clear when Brazil’s central bank may start lowering interest rates, equity issuance, especially IPOs, could rise again. Brazil saw deflation last month as fuel prices fell.
So far this year, there have been no IPOs in Brazil, but follow-up products. According to Refinitiv data, there were 46 transactions last year, including 46 IPO. Bradesco BBI will not make any changes to the team this year as the bank expects a recovery in equity capital markets in the medium term, Thut said.