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.
2025-07-11Central Bank of Paraguay
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%.