According to Bradesco BBI, falling spreads signal a recovery in private credit.

After a widening of spreads at the beginning of the year, due to credit events that slowed debt issuance , the Brazilian fixed income market is beginning to see a normalization of the situation.

This assessment comes from Felipe Thut , head of fixed income and structured products at Bradesco BBI , who believes that not even the election, with its capacity to lead companies and investors to a more cautious stance, will be able to harm what he predicts will be another good year for the private credit market.

“Despite the impression that the fixed-income credit market is more difficult, it is much more positive than it was in the last election, in 2022,” he said on Tuesday, May 19, at a meeting with journalists. “And if we look at 2018, it shows much higher volume.”

According to him, from the end of April to the first half of May there was a significant narrowing of spreads, mainly in CDI-linked bonds, although they are still not at the level prior to the credit events.

Even with the war in the Middle East , spreads are at a lower level than seen in 2022. In the secondary market, the CDI credit spread for companies with an "AAA" rating, in bonds maturing in three and a half years, averaged 1.33%, while it is currently around 0.75%, after reaching 1% at the beginning of the year.

“I believe the CDI market spread will narrow further than it is today,” Thut stated. “Even with the opening at the beginning of the year and now with this closing, companies are raising capital more cheaply than in the previous election cycle.”

According to the Bradesco BBI executive, the fixed income market is reacting much less to the election , focusing more on new credit events and, especially, on the trajectory of interest rates.

"Regardless of who the candidate is, what matters are that candidate's plans and how those plans will impact inflation and future interest rates," he said.

"What would concern me regarding the trajectory of CDI spread narrowing would be the emergence of some other credit event that we are not currently seeing. We don't have any company on our radar moving in that direction," he added.

Thut also pointed out that companies may have postponed operations at the beginning of the year, resorting to the banking market, but none were deprived of access to resources.

According to him, the drop in spreads is causing issuers to look at the market again. "We are warming up the engines; we see the volume in this CDI market returning significantly in a short period of time," he said.

In the case of incentivized debentures , because the funds have longer redemption periods, these vehicles "suffer" for a longer time, discouraging investments in this type of security.

Despite the projected recovery, Thut stated that the expectation is for a 10% to 20% drop compared to the previous year, when fixed income attracted R$ 737.7 billion, according to data from the Brazilian Association of Financial and Capital Market Entities (Anbima).

According to him, between 2024 and 2025, when spreads were very low , companies went to the market to issue bonds and extend the maturity profile of their debts – about 46% of companies used the funds raised for this purpose.

This year, Bradesco BBI projections indicate that R$ 29 billion in debentures are due to mature, while last year total debt issuance reached R$ 544.8 billion. Next year, R$ 51 billion will mature.

"All companies took advantage of the low spreads and pushed their debts forward. There is no liquidity pressure problem, with companies needing to renew several lines of credit that are about to expire," he said.

The expectation is that companies in need of investment, such as utilities or infrastructure operators, and those with M&A plans, will access the market.

For international market issuances, Thut expects them to remain around US$30 billion, following a record US$35 billion in 2025, with the market still open despite the local turbulence caused by credit events.

Success and final cost depend on international investors' knowledge of the company. Names like Rede D'Or and JBS managed to secure very low spreads relative to Treasuries in transactions carried out this year, according to Thut.

“Credit events are never positive for the market; investors look at them carefully and become more discerning in future issuances. And the concern is whether the credit risk is being compensated by the price,” he said.