As Brazil’s Central bank continues to slash benchmark interest rates to record lows, Brazilian capital markets enter a brave new world, with investors forced to leave the comfort of public bonds to venture into more profitable alternatives. Among them, corporate bonds are a rising star—which could spell good news for companies and the government alike.
According to Anbima, the Brazilian association of financial and capital markets entities, the local capital market raised BRL 240.1 billion in the first seven months of the year. This was 38.7 percent higher than the same period of 2018. Of this total, BRL 117.4 billion (48.9 percent) was related to corporate bonds.
“The agents expect that this year’s good performance will continue in the following months, considering the significant amount of issuances that are still under analysis by [the Brazilian Securities and Exchange Commission] CVM,” wrote Anbima.
What does it mean for the economy?
Corporate bonds are a debt instrument companies use to get funds for projects, investments, or acquisitions, manage their debts and other activities. In exchange for the money, enterprises pay bond creditors previously established interest over a given period of time. Normally, this interest is attached to the so-called “DI” rate (the rate banks pay for lending money...
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