The Central Bank of Paraguay has revised the cap on forward transactions that financial institutions can enter into with nonresident investors holding PYG-denominated Public Treasury Bonds issued in international markets. The change raises the permitted limit to 50% of each institution's effective capital, up from the previous 10% cap, expanding the banking system's capacity to provide foreign exchange hedging for overseas investors in local-currency sovereign debt. The previous framework limited the net volume of forward operations with nonresidents, constraining banks' ability to offer currency protection against exchange-rate volatility. The central bank linked the update to stronger foreign investor interest in Paraguay, noting that nonresident participation in the latest auction in June reached 42%. It also cited Paraguay's investment-grade rating from Moody's as part of the backdrop for adapting the hedging regime to current market conditions and supporting foreign capital inflows, particularly into PYG debt issuance.
Central Bank of Paraguay2025-07-11
Central Bank of Paraguay raises forward limit for nonresident holders of PYG Treasury bonds to 50% of bank capital
The Central Bank of Paraguay has raised the limit on banks' forward transactions with nonresident holders of PYG-denominated Public Treasury Bonds issued in international markets to 50% of effective capital from 10%. The move expands foreign exchange hedging capacity for overseas investors as demand for local-currency sovereign debt increases. Nonresident participation in the latest June auction reached 42%.