Business · Markets · 4 hrs ago
Tax-exempt infrastructure bonds offer wider premiums after election
Brazilian infrastructure bond yields fell in the week after the first round of the presidential election.
These bonds help finance infrastructure projects and are exempt from income tax for investors.
Their average yield fell from 8.64% on October 2 to 8.08% on October 8, while comparable government bond yields dropped more sharply.
That widened the bonds’ premium over government debt from 1.08 to 1.27 percentage points.
The higher premium, alongside the tax exemption, has led some fund managers to see an attractive entry point for investors, including through infrastructure funds.
Redemptions and fewer new bond issues have also lifted premiums, after a difficult year for the market.
Infrastructure debentures offered a wider premium over comparable government bonds after the first round of the presidential election.
The average yield on 213 inflation-linked infrastructure debentures fell from 8.64% on October 2 to 8.08% on October 8.
Yields on comparable NTN-B government bonds fell more sharply, lifting the average spread from 1.08 to 1.27 percentage points.
Managers and analysts said the wider spread, combined with the bonds’ income-tax exemption, could make them attractive to investors.
Infrastructure bond funds faced redemptions, while new issuance had slowed.
- Who
- Investors, fund managers and analysts in Brazil’s infrastructure debenture market.
- What
- Infrastructure debentures offered a wider average premium over comparable government bonds. Their income is exempt from income tax.
- When
- The change followed the first round of the presidential election. The figures compare October 2 with October 8.
- Where
- Not stated
- Why
- Yields on comparable government bonds fell more than debenture yields. Redemptions and lower issuance were also associated with wider spreads.
This story does not have two clearly opposing sides.
The average yield on 213 inflation-linked infrastructure debentures was 8.64%, and the average spread over comparable NTN-Bs was 1.08 percentage points.
Infrastructure debenture yields fell, following rates on NTN-B government bonds.
The average infrastructure debenture yield was 8.08%, while the average spread over comparable NTN-Bs had risen to 1.27 percentage points.
R$ 72.8 billion in incentivized debentures had been issued, 25% less than in the same period of the previous year.
- Debentures surveyed
- 213 inflation-linked infrastructure debentures
- Average yield, October 2
- 8.64%
- Average yield, October 8
- 8.08%
- Average spread, October 2
- 1.08 percentage points
- Average spread, October 8
- 1.27 percentage points
- Issuance through August
- R$ 72.8 billion, 25% below the same period of the previous year
What people are saying
The interest rates on these bonds were already at levels that seemed attractive even before the recent deterioration, and now they draw even more of our attention.
Despite the unfavorable technical factors in the short term, the yield levels of tax-exempt bonds are attractive and we are facing a good entry point.
We could end the year with less than R$ 100 billion in primary infrastructure debenture issuance, a drop of more than 50% compared with 2025 and 2024.
Sources
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