UPDATE 1-Brazil Nov federal debt rises, foreign stake eases

* Brazil federal debt at 1.575 trillion reais ($922.7 bln)

* Net debt issuance totals 6.26 billion reais

* Foreign participation continues to fall
(Recasts, adds details, comments and byline)

By Isabel Versiani

BRASILIA, Dec 20 (BestGrowthStock) – Brazil’s federal public debt
rose for a fourth straight month in November as debt-servicing
costs surged and even as the prospect of higher interest rates
curbed demand for new issuance.

The federal debt in marketable securities rose 1.43 percent
to 1.575 trillion reais ($922.7 billion) last month on net debt
issuance of 6.26 billion reais and as interest accumulated on
the debt totaled 15.94 billion reais, the National Treasury
said on Monday.

The data underscores the growth in domestic debt issuance
spurred by a surge in government spending ahead of presidential
elections in October. Bond sales to help replenish the capital
base of national development bank BNDES and fund key
infrastructure projects have also added to the debt burden.

The amount of bonds sold in the market was its lowest in
six months as investors sought higher premiums to compensate
for an expected rate hike next year, the head of public debt
operations, Fernando Garrido, said at a news conference.

The National Treasury issued 19.5 billion reais worth of
debt in the market in November — a figure that does not
include debt sold to entities such as the BNDES.

The central bank is widely expected to raise borrowing
costs from 10.75 percent early in 2011.

Foreign investors also became more reluctant to invest in
Brazilian bonds after the government tripled a tax on capital
inflows into fixed-income to 6 percent from 2 percent in
October.

Their participation in Brazil’s domestic debt fell for a
second consecutive month to 10.03 percent from 10.19 percent
the prior month.

The share of inflation-linked bonds eased to 28.08 percent
from 28.37 percent and the proportion of securities indexed to
the central bank’s Selic lending rate (BRCBMP=ECI: ) fell to
33.08 percent from 33.32 percent the prior month.

The share of fixed-rate bonds rose to 37.36 percent of
total issuance this year in November from 36.73 percent the
previous month.

Promises by President-elect Dilma Rousseff’s incoming
administration for substantial budget cuts in 2011 could reduce
the government’s need to issue more bonds down the line,
helping to ease the country’s debt burden.

Last week, Brazil took measures to stimulate long-term
credit in the private sector in a bid to make the country less
dependent on state lending. For more, see: [ID:nN15167041]

($1=1.707 reais)
(Writing by Ana Nicolaci da Costa; Editing by Dan Grebler)

UPDATE 1-Brazil Nov federal debt rises, foreign stake eases