Brazil's federal public debt falls in August, composition worsens
Recasts with further details
BRASILIA, Sept 30 (Reuters) - Brazil's federal public debt declined by 1.46% in August from the previous monthdriven by a high volume of redemptions, while its composition showed further deterioration, Treasury data showed on Monday.
Marking the first contraction since January, the debt stock fell to 7.036 trillion reais ($1.25 trillion).
According to the Treasury, bond redemptions totaled 271.3 billion reais in August, while issuances reached 107.9 billion reais.
The net result of this movement more than offset the interest payments for the period,which totaled 59.3 billion reais.
Meanwhile, the share of bonds linked to the country's benchmark interest rate Selic, known as LFTs, continued to rise, now accounting for 46.85% of total debt, up from 44.95% in the previous month.
This is the highest percentage since November 2005 (47.78%) and is now nearing the upper end of a newly revised range of 43%-47% expected for this year, which was raised earlier this month by the Treasury from the previous forecast of 40%-44%.
These bonds tend to reduce the debt's management predictability. Although the government aims to limit their use in the long term, LFTs are more in demand among investors during times of heightened risk aversion.
The growing share of LFTs also increases costs when borrowing costs rise. The central bank began a tightening cycle earlier this month with a 25 basis-point hike, bringing the Selic rate to 10.75%.
Private economists surveyed weekly by the central bank anticipate further increases totaling 100 basis points by year-end.
Treasury Secretary Rogerio Ceron said that every 100 basis-point rise in the Selic rate adds 30 billion to 40 billion reais to the debt.
($1 = 5.4482 reais)
Reporting by Marcela Ayres; Editing by Leslie Adler and Sarah Morland
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