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Primary Market Strategy

Borrowing strategy in 2015 will seek to contribute toward continued progress on the path toward the optimal FPD structure. To achieve this end, consolidation of a debt profile in which fixed rate and inflation-linked bonds predominate will be required, in order to generate gradual attenuation of market risk. The basic guidelines on lengthening average FPD maturities and holding short-term maturities at prudente levels will be maintained.


Parallel to this, 2015 borrowing strategy will also seek to distribute maturities more effectively over the coming years, in such a way as to contribute to reducing medium-term refinancing risk and providing adequate liquidity to the securities issued.


At the same time, the National Treasury will continue its dialogue with the various representatives segments of the financial market in order to broaden and diversify the investor base, preserve the characteristic transparency of its operations and ensure a more adequate supply of government bonds.



Fixed-rate Securities


In 2015, the offer of four LTN vertices will be maintained, with terms ranging from six months to four years, among which short and medium-term vertices of the yield curve should be highlighted. In order to provide adequate liquidity in each vertex, issuances of NTN-F maturing in January 2021 and January 2025 will be maintained. Finally, the rule on allocating LTN maturities in January, April, July and October will be preserved.


Aside from traditional auctions, the semi-annual exchange auctions of LTN will be resumed and held in June and December, with the objective of reducing impacts on liquidity and making it possible for investors to anticipate their reinvestments before the maturity date. At the June auction, the Treasury will issue LTN maturing in October, 2015 and will redeem LTN maturing in July, 2015. And, at the December auction, the Treasury will issue LTN maturing in April, 2016 and will redeem LTN maturing in January, 2016.


Additionally, there will be exchange auctions of NTN-F, to be held in January and July. Not only the NTN-F exchange auctions will make it possible to lengthen the debt profile, but also they will provide to investors that want to trade off-the-run bonds the opportunity to exchange them by on-the-run bonds. Off-the-run bonds have shorter term and lower secondary market turnover (like the NTN-F maturing in 2017, 2018 and 2019), while on-the-run bonds have longer tenor and higher turnover (like the NTN-F maturing in 2025).


Finally, in order to ensure additional liquidity to investors, the National Treasury will continue its buyback auctions of long-term NTN-F in 2015, which will now be held on a quarterly basis in March, June, September and December.


In!fation-Linked Bonds


Quarterly offers of NTN-B, that generates earnings according to the Extended National Consumer Price Index – IPCA, will also be performed. Sales during the auctions will be organized into two groups, according to maturities. Group I will be composed of two bonds with terms of up to 10 years and Group II will involve two vertices with longer terms of 20 and 40 years.


Aside from this, buyback auctions of long-term NTN-B will be held on a quarterly basis in such a way as to ensure liquidity to those holding these securities, while NTN-B exchange auctions will be held monthly.



Floating-Rate Bonds


In 2015, bonds with earnings based on the Selic interest rate – LFT will be offered on a monthly basis, with maturities in March and September 2021. Consequently, the average issuance term of these securities will be close to six years, which means a higher level than the average maturity of the outstanding FPD.



Other Measures in the Domestic Market


Aside from the previously described government bond issuance strategy, other measures should be implemented in pursuing advances in the operations of the domestic government bond market. These measures will focus mainly at the secondary market, broadening and diversi ication of the investor base, elimination of indexation to the overnight interest rate and development of the domestic fixed income market, as a financing alternative for the private sector.


In this sense, support to development of fixed income benchmarks, such as the ANBIMA Market Index - IMA and its sub-indices, remains as one of the National Treasury's permanent concerns, since this would produce positive repercussions on the composition and lengthening of both public and private fixed income bonds on the domestic Market.


Starting with the 2014 de inition of the tax rules applicable to Exchange Traded Funds – ETF, it will be possible to create new investment instruments associated to fixed income indices, as of 2015. This, in turn, should make opportunities available for the evolution of the secondary government bond market and for the expansion of the investor base, with reduction of overnight interest rate indexing of financial assets.


The National Treasury will continue providing its support to measures that seek to develop the debenture market as an important source of public and private investment financing and as an alternative to public sector sources, with obvious impact on the successful development of the Brazilian fixed income market.


Finally, the Treasury will support projects aimed at training professionals and providing financial education to investors, while continuing its policy of improving the market makers system and backing utilization of electronic platforms, with emphasis on studies involving practices and products capable of contributing to the development of the Brazilian fixed income market.


For more information, consult the Annual Borrowing Plan.