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The public debt bonds may be issued with three objectives:
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to finance budget deficits; |
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to perform operations for specific reasons, as defined by law; and |
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to refinance the public debt. |
Bonds are issued on the domestic market through public offerings (auctions) to financial
institutions, public offerings to individuals (Tesouro Direto), and direct issuances for
specific reasons, as defined by law.
The National Treasury issues bonds to meet fiscal policy needs. The Central Bank uses National
Treasury bonds to implement monetary policy, through purchase and sale operations in the
secondary market.
The new Dealers system was another noteworthy achievement implementation in the general financial
market. Under the new system, the National Treasury has become more active in debt transactions.
Previously, the dealers system was exclusively used by the Central Bank, aiming at helping monetary
policy management. However, the former system was doing little to help the development of the secondary
debt market, limiting its actions to provide debt market players with increased liquidity and helping to
form an interest rates term structure in a more consistent way. This was the main reason why the
National Treasury and the Central Bank jointly reorganized the system and has implemented a single,
jointly- run structure to help managing both debt and monetary policy. Two groups of dealers were
created (compared with just one previously):
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Primary Dealers a group focusing on primary auctions and money-market operations, comprising up to 9 institutions; |
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Specialist Dealers group of up to 11 institutions that focuses on the secondary market. |
There are distinct rules governing the two groups. For an example, there is a heavier weight for
participating in National Treasury public auctions for primary dealership, while specialist dealers
must trade large amounts of debt in the secondary market. The introduction of specialist dealers
encouraged secondary market trading, helping to expand liquidity in the system.
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