By Marcela Ayres

BRASILIA (Reuters) - Brazil's Treasury on Tuesday estimated that federal public debt will rise up to 16% this year, as bonds linked to the benchmark interest rate potentially exceed half of total debt, exposing them to the central bank's aggressive push to tame inflation and making it costlier for the country to service its debts.

The Treasury's annual financing plan sees debt ranging from 8.1 trillion reais to 8.5 trillion reais ($1.47 trillion) in 2025, up from the 7.316 trillion reais recorded in December.

It also stressed the continued strategy of issuing conventional and sustainable bonds to provide a reference for the Brazilian sovereign yield curve, adding it "may use external liability management operations to enhance the efficiency of the yield curve."

The Treasury estimated that the share of debt linked to the benchmark Selic interest rate will account for 48% to 52% of the total this year, after rising to 46.3% in 2024.

These floating-rate bonds, known as LFTs, reached their highest share in 20 years last year, amid intense volatility from shifting interest rate expectations in the U.S. and concerns over Brazil's growing indebtedness.

According to Treasury Secretary Rogerio Ceron, the strategy of increasing the share of floating-rate bonds aligns with market appetite.

"There is no point in working against market demand," he said at the press conference.

Such securities are typically more appealing to investors during periods of heightened risk perception but leave debt costs vulnerable to sharp increases when interest rates go up.