Brazil's federal debt rises 3.3% in February amid strong issuance

BRASILIA, March 28 (Reuters) - Brazil's federal public debt rose 3.3% in February from the previous month, Treasury data showed on Friday, driven by strong domestic debt issuance and the country's return to international markets.

Total debt stock climbed to 7.492 trillion reais ($1.3 trillion), boosted by a net issuance of 165.7 billion reais in the month, along with 73.7 billion reais in interest payments.

Latin America's largest economy raised $2.5 billion in February through a new 10-year dollar-denominated sovereign bond.

However, issuance was much heavier in the domestic market, which accounts for 95.8% of the country's total debt.

That included 67.45 billion reais in securities linked to the benchmark interest rate, Selic, 64.29 billion reais in fixed-rate bonds, and 58.11 billion reais in inflation-indexed debt in February.

According to Helano Borges Dias, head of public debt operations, February's debt issuance was the highest on record for a single month.

Speaking at a press conference, he noted the trend continued in March, with about 120 billion reais in public offerings and a more favorable composition than last year.

Fixed-rate bonds accounted for over 50% of March issuance, while Selic-linked securities made up 40%, Dias said.

Earlier this year, the Treasury projected an increased share of Selic floating-rate bonds in total 2025 debt. These securities, known as LFTs, attract investors during periods of high risk perception but expose debt costs to rate hikes.

Since last September, Brazil's central bank has aggressively raised interest rates to curb inflation, lifting the Selic by 375 basis points to 14.25%, with another hike signaled for May.

Reflecting the high interest rate and inflation environment, the average cost of public debt issuance in the domestic market over the past 12 months rose to 11.92% in February from 11.36% in the previous month - the highest since September 2023.

($1 = 5.7641 reais) (Reporting by Marcela Ayres; editing by Gabriel Araujo and Rod Nickel)