Treasury Direct: rates soar with fuel PEC and fiscal risk

Public bond rates advance strongly on Tuesday morning (28). In fixed-rate securities, rates rise by up to 15 basis points, while in inflation-linked bonds, the rise is up to 12 basis points.

According to Luciano Costa, chief economist and partner at Monte Bravo Investimentos, what drives this movement is the fiscal risk, with the opinion of the Proposed Amendment to the Constitution (PEC) on Fuels that should be presented today by the rapporteur Fernando Bezerra Coelho (MDB). -FOOT). The reading of the opinion is scheduled for 18:00.

Costa explains that the PEC’s opinion has an estimated cost of R$ 34.8 billion, however, new spending demands are emerging, for example, assistance for workers in the autonomous cargo transport segment. “This would already represent another R$ 5 billion of expenses and would raise the cost of the PEC to R$ 40 billion”, explains the economist.

He cites a market fear that these expenditures may be underestimated. “The Ministry of Economy thinks that spending on emergency aid expanded from R$400 to R$600 has a cost of R$30 billion, instead of R$22 billion as estimated in the opinion”, he points out.

On the international scene, Costa highlights the movement of Treasuries – US Treasury bonds – which also advance with news of the reopening of China and the rise in commodities. “The market is calmer about the risk of a global recession,” he says.

Within the Treasury Direct, fixed rate rates advanced 15 basis points in the first update on Tuesday (28).

Treasury Rate 2025 and Treasury Rate 2029 offered an annual return of 12.76% and 12.89% respectively, up from the 12.61% and 12.74% seen yesterday.

The 2033 Fixed Rate Treasury has suspended negotiations, due to the payment of the semi-annual coupon, scheduled for July 1st. The reason is that the Treasury Direct usually prohibits the purchase of the security four business days before the payment of the interest coupon. In addition, the repurchase of these securities will also be suspended from the two business days prior to the payment of the coupon.

In inflation-linked bonds, the movement was also up, with rates rising between 9 and 12 basis points.

The Treasury IPCA+ 2055 offered the biggest real gain among the bonds, of 6.02%. The rate offered is a record for 2022.

The IPCA+ 2035 Treasury also reached a record level in rates. The IPCA+ 2040 Treasury, with half-yearly interest, returned to the maximum level of 5.91%, last seen on March 14th.

Check the prices and rates of all public securities available for purchase at the Treasury Direct this Tuesday morning (28):

Source: Direct Treasure


Brazil created 277,018 formal jobs in May, a strong increase compared to April (196,966) and a result well above market expectations (the Refinitiv consensus projected 192,750 new CLT jobs last month).

Data from the General Register of Employed and Unemployed (Caged) were released this Tuesday (28) by the Ministry of Labor and Social Security.

Selic’s view

According to a Focus XP survey, institutional investors are betting on a Selic rate of 13.75% for the end of 2022.

The median of responses from the 39 institutional investors also shows Selic at 10.50% in 2023. Data released in the Copom (Monetary Policy Committee) communiqué show medians at 13.25% for 2022 and 10.0% in the following year . 85% of respondents expect a further 50 bps increase in August and 13% expect a deceleration to 25 bps. For September, 87% expect the Selic rate to be maintained.

In the other indicators, the median expectation is BRL 5.00 for the exchange rate at the end of 2022 and also in 2023. For GDP, respondents expect growth of 1.60% in 2022 and 0.50% in 2023, against 1.42% and 0.55% disclosed at the monetary policy press conference last Thursday (23/06).

Industry Confidence Index

The Industry Confidence Index (ICI) increased 1.5 points in June, according to data from Fundação Getulio Vargas.

According to FGV, with the third consecutive increase, the index reached 101.2 points, the highest level since November 2021 (102.1 points). Between July of last year and March 2022, the ICI accumulated a drop of 13 points. The advance in June was driven both by the assessment of the present and by the perspectives of the sector.

The Current Situation Index (ISA) rose 1.9 points to 102.3 points, while the Expectations Index (IE) rose 1.2 points to 100.2. The Installed Capacity Utilization Level (NUCI), in turn, rose 0.6 percentage point to 81.4%, the highest level since June 2014.

Long inflation bonds on the radar

The perception of a part of the market that the Selic high cycle, already at 13.25% per year, should end soon has led specialists to look with affection at the farthest part of the yield curve. In the view of some of them, interest rates on long-term government bonds linked to inflation are attractive.

According to Nicolas Giacometti, a fixed income specialist at Blue3, the prices of longer-term bonds are more sensitive to risk and, therefore, vary more intensely. Thus, it is possible to find in them opportunities for capital gains in early exits, before the maturity of the papers.

Explain yourself: the interest offered by a fixed income security has an inverse relationship with its trading price by investors. When rates fall, their value tends to rise. The opposite is also true.

The expectation (although not consensual) that interest rates will stop rising at the next Monetary Policy Committee (Copom) meetings – and, much later, they will begin to cool down – could favor the rise in inflation bond prices. In practice, due to the so-called “mark-to-market” of the securities, some experts believe that they can increase in value.

In this case, papers with longer maturities, such as 2060, may be good options for an allocation with this objective, says Giacometti. As this type of maturity is not available in Treasury Direct, an alternative is to allocate to Treasury IPCA + 2055, for example.

Another option, says the expert, is to invest in bonds maturing in 2035, in which the risk-return ratio seems attractive.

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With an eye on the end of the Selic high cycle, experts are starting to turn to long inflation bonds