Brazil's Floating-Rate Debt Share Could Hit Record 53% This Year

Brazil's Treasury has revised its annual financing plan, projecting that the share of public debt tied to the benchmark Selic rate could reach a record 53% of the outstanding stock this year. The updated forecast, released on Wednesday, raises the expected range to 49%-53%, up from the previous projection of 46%-50%. As of July, floating-rate debt already accounted for 51.1% of the total.

The shift reflects a broader trend of investor caution. With the Selic rate still at 14% despite easing that began in March, and 12-month inflation at 4.2% in mid-August, Brazil continues to offer some of the highest real interest rates among major economies. The Treasury noted that heightened volatility and elevated rates have pushed investors toward shorter-duration instruments that are less sensitive to interest-rate fluctuations.

At the same time, the Treasury lowered its forecast for inflation-linked debt to 21%-25% of the total, down from 23%-27% previously. The projected share of fixed-rate securities was also trimmed to 20%-24% from 21%-25%, while foreign-exchange-linked debt remained unchanged at 3%-7%.

The revised outlook comes amid global market turbulence and persistent concerns over Brazil's fiscal trajectory. Gross public debt, the country's main solvency measure, reached 81.9% of GDP — more than 10 percentage points higher than when President Luiz Inacio Lula da Silva took office.

The projections were released alongside July data showing the federal debt stock rose 0.22% from the previous month to 9.289 trillion reais ($1.8 trillion).