Treasury Direct: rates rise again with fiscal risk and Petrobras on the radar

Contrary to the downward movement seen this Tuesday morning (21), public bond rates rose again in the afternoon.

In fixed rates, the movement is upwards in short and medium-term rates. In inflation-linked bonds, all papers show gains in profitability.

According to Luciano Costa, chief economist and partner at Monte Bravo Investimentos, political noise is the background for this upward movement, mainly involving Petrobras. He cites that the market is also discussing the extent to which the Central Bank may or may not end the bullish cycle in August.

In the morning, the Copom released its minutes in which it delivered a speech that made clear the message that the cycle of monetary tightening could end at the next meeting, according to Costa.

“Our interpretation is that the market will understand that it is difficult for the Central Bank to go much further than this August meeting, where it should raise interest rates by 0.50 or 0.25 points, but does not have an additional risk for the other meetings” , says.

However, the market seems to have become more cautious in the afternoon and has not completely removed the premium from the yield curve, assesses the chief economist at Monte Bravo Investimentos.

“There are always fiscal noises appearing, the discussion about Petrobras creating some kind of subsidy for gasoline and fuels and how this would be financed. These factors make the market more cautious,” he says.

Apparently, this caution would already be perceptible in inflation-linked bonds, which showed increases in short and long rates.

On the market’s radar and that could impact future sessions on the yield curve, Costa cites the semi-annual testimony of Jerome Powell, chairman of the Federal Reserve, in the United States House and Senate this Wednesday (22).

On Thursday (23) at 11 am, Roberto Campos Neto, president of the Central Bank and the director of economic policy at the BC, Diogo Guillen, give a press conference on monetary policy. However, the quarterly inflation report (RTI) will be published one week late on June 30th.

Attention should also be paid to the IPCA-15 – preview of the official inflation for June – which will be released on Friday (24) and may influence the behavior of interest rates.

Within the Direct Treasury, the biggest increase was in the medium-term fixed rate security. The Prefixed Treasury 2029 offered at 15:26 an annual return of 12.69%, higher than the 12.63% seen on Monday (20).

The Prefixed Treasury 2025 had an annual return of 12.55%, above the 12.53% recorded yesterday.

The 2033 Fixed Rate Treasury, with semiannual interest, operated with stability.

In inflation-linked bonds, the movement was an increase in rates, between 6 and 12 basis points.

The biggest increase was in the IPCA + 2026 Treasury rate. The public bond offered a real gain of 5.47% this Tuesday (21), higher than the 5.35% seen yesterday.

Check the prices and rates of all public securities available for purchase at the Treasury Direct this Tuesday afternoon (21):

Source: Direct Treasure

In the USA

A necessary evil to control inflation or a major monetary policy mistake? For many market analysts, last week’s decision by the Federal Reserve to raise interest rates by 0.75 percentage point (the biggest percentage increase since 1994, with rates ranging from 1.5% to 1.75%) after last-minute signals from the Fomc (the monetary policy committee of the US central bank), it could fit in both situations.

This measure, in addition to being seen by many as delayed, began to indicate a decrease in the credibility of the Fed by the way in which it was made, as well as the projections for the economy came to be seen as unbelievable. At the same time, the vision of still resilient inflation and the need to raise interest rates to a level seen as restrictive (which slows down the economy) has increasingly increased the likelihood of a recession in the US.

Vincent Reinhart, chief economist at Dreyfus and Mellon, who worked for 24 years at the Fed, of which he was director, criticized the US central bank, especially the timing for raising interest rates.

“The Fed is well behind the curve, started raising rates very late and should have been more aggressive earlier in this process. But, as inflation is very high, which has already raised expectations for price indices, it had to act with force and raised the rate more than the Central Bank of Brazil on the same day. [o Copom brasileiro elevou a Selic em 0,5 ponto percentual]”, pointed out the economist in an interview with Broadcast.

Reinhart points out that Fed committee members are working hard to establish a gradual pace in the withdrawal of accommodative policy and have committed to raising rates by 0.50 percentage point for two meetings. “However, two days before the end of the June meeting, it was expressed off the record (ie without revealing the source) to a single media outlet: ‘Never mind, we’re going to raise 0.75 percentage point’. All of this gradually erodes the credibility of the Federal Reserve chairman for future commitments”, he reinforced.

Copom Minutes

The Central Bank admitted in the minutes of the Copom (Monetary Policy Committee) released this Tuesday (21) that inflation should not converge to the center of the target in 2023, despite the extension of the cycle of high interest rates, and said that the The Selic will need to rise further and remain higher for longer to fight the rise in prices.

The BC inflation target for 2023 is 3.25%, with a margin of 1.5 percentage points (that is, it will be met if it stays between 1.75% and 4.75%), and the monetary authority is now speaking in “bringing the projected inflation at 4.0% to around the target in the relevant horizon” (stopping the expression “centre of the target”, as he had already done in the statement released after raising the Selic to 13.25% per year ).

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• “Hawkish” or “dovish”? Market questions mention of inflation “around the target” in Copom statement

The Copom says that the IPCA should not converge to the target even with the continuation of the cycle of high interest rates and with the Selic higher for a longer time (and above the reference scenario). Currently, the BC projects an interest rate of 13.25% per year at the end of 2022, 10.0% in 2023 and 7.50% in 2024; under these conditions, inflation would end the respective years at 8.8%, 4.0% and 2.7%, respectively. The market already projects a lower IPCA this year (8.5%), but higher in the following years (4.7% and 3.25%).

“The Committee assesses, based on the projections used and its balance of risks, that the strategy required to bring the projected inflation at 4.0% to around the target in the relevant horizon combines, on the one hand, a terminal interest rate above the used in the reference scenario and, on the other hand, maintenance of the interest rate in a significantly contractionary territory for a longer period than that used in the reference scenario”, says the Copom minutes. “Thus, the strategy of convergence around the target requires a more contractionary interest rate than that used in the baseline scenario throughout the relevant horizon”.

Lula X Bolsonaro

Former president Luiz Inácio Lula da Silva, who is vying for the PT’s command of the Planalto, called the creation of the Petrobras CPI “absurd”. At an event to launch the final guidelines of his government plan, this Tuesday (21), in São Paulo, the PT criticized the stance of President Jair Bolsonaro (PL).

“It’s an absurd thing. the first thing he [o presidente Jair Bolsonaro] tries to do is to shift the responsibility for their disability onto others. When Pedro Parente adopted the PPI, the international parity price, he did not take it to the National Congress. It wasn’t at a UN conference. He didn’t go to the Senate. It was a decision by the president of Petrobras, certainly listening to the Petrobras Board, if he listened at all. So he made the decision, on the pretext that it was necessary to save Petrobras,” he said.

“In the same way, they took the decision to privatize BR saying it was necessary to be more competitive. The more competitiveness, the more the price of fuel would stop. And the price of fuel is actually going up. It means that something is very wrong in this country. Bolsonaro could, with a stroke of the pen, as Pedro Parente did, force the president of Petrobras to reduce the price. He could listen to the Petrobras Board and reduce the price. If he had any doubts, he could bring together the National Energy Policy Council, the Petrobras Council, the president of Petrobras, and he president [da República] could make the decision that it is necessary to reduce for the benefit of Brazilian society”, he added.

The former president also said that Bolsonaro makes “a lot of bravado” and that “he doesn’t want to fight with shareholders, who keep the profit that Petrobras is making, which is exorbitant”. “They are going to try to create all possible confusion to see if they can propose the privatization of Petrobras, who knows even this year”, said Lula.

President Bolsonaro defended the creation of a CPI (Parliamentary Commission of Inquiry) to investigate the conduct of the president of the state-owned company, José Mauro Coelho, who resigned yesterday (20), the company’s board and its advisors. The idea came shortly after Petrobras announced a new adjustment in fuel prices last Friday (17th).

The government mobilized its base of allies to sign the document creating the CPI, which already has names such as Eduardo Bolsonaro, son of the president, Bia Kicis and Daniel Silveira.

CDBs yield

Investors have observed (certainly with good eyes) recurring increases in the yields of the main fixed income investments in recent months – especially in those that demand a longer-term investment horizon.

In the last fortnight, the yield on floating-rate CDBs (Bank Certificates of Deposit) maturing in more than three years increased to an average of 102.84% of the CDI, compared to a previous rate of 101.43% of the CDI.

It was the biggest increase in remuneration among post-fixed CDBs from one fortnight to the next, according to a survey carried out by Quantum Finance, a solutions company for the financial market, at the request of the InfoMoney. The numbers consider the period between June 6th and 17th. Returns are gross, without deducting income tax.

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• Yield on 3-year CDBs rises to almost 103% of CDI on average; Maximum rate reaches 115%

• Can you earn 1% per month net of income tax with Selic at 13.25%? Simulation shows minimum fee required

Post-fixes are the most common type of CBD available on the market. In them, the investor knows which indicator will serve as a reference for the profitability of the paper from the moment of application. But it is not possible to be sure what the return will be in reais, because it will follow the dynamics of the indicator’s variations. The return is normally expressed as a percentage of the CDI rate (Certificado de Depósito Interfinanceiro), a reference index for fixed income investments.

Among the CDBs with terms of three years or more, the maximum remuneration found during the fortnight was 115% of the CDI, offered by Banco Modal, also higher than the 110% of the CDI verified in the fortnight between May 23 and 3 of June.