Direct Treasury: Rates go down with China, doubts in domestic politics

General bond prices fall on Monday afternoon (16). Fixed rate yields shrink by up to 24 basis points, while inflation-linked bond prices fall.

According to Christian Quartalori, an economist at Banco Ourinvest, interest rates were practically stable for most of the day, but then showed a certain volatility due to volatility.

The economist highlights some of the factors that have contributed to volatility, among them the pace of growth in China. at Retail sales and industrial production data Chinese prices fell below market expectations. Despite fears of a slowdown in the country, the People’s Bank of China (PBoC) kept the interest rate unchanged.

The war in Eastern Europe also affected Finland’s accession to NATO and uncertainty about the domestic political framework.

“For now, the market continues to price another rate hike at the next meeting,” Christian notes.

On the market’s radar, which may influence the upcoming sessions, highlights US inflation data and speeches by Federal Reserve leaders. He assesses, “Brazil should follow the behavior of the external scenario.”

Within direct treasury, the largest decline was in long-term fixed-rate bonds. The fixed-rate Treasury 2033, with semi-annual interest, delivered an annual return of 12.49%, down from 12.73% in the previous session.

While the fixed rate treasury 2025 and the fixed rate treasury 2029 achieved annual returns of 12.56% and 12.42%, respectively, down from the 12.66% and 12.62% seen on Friday (13).

On inflation-linked bonds, most interest rates fell between 4 and 9 basis points.

In the case of inflation-linked securities, the maximum real wage offered was 5.76%. This percentage was delivered by Treasury IPCA +2055, which resumed trading on Monday, with the coupon paid.

Check the prices and rates of all public securities available for purchase in the Treasury Direct and shown on Monday afternoon (16):

China and NATO

Facing fears of an economic slowdown, China has returned to the center of investors’ attention. The National Bureau of Statistics (NBS) reported today that retail sales in China fell 11.1% year-on-year in April.

The downturn exceeded expectations of the economists he consulted The Wall Street Journal, which forecast a 5.4% decrease. The result was also worse than that obtained in March, negative 3.5%.

Meanwhile, China’s industrial production fell 2.9% year on year. The figure was less than the 1.0% growth forecast by the market and the 5.0% expansion seen in March.

Despite fears of an economic slowdown, the People’s Bank of China (PBoC, China’s central bank) Interest rates were kept unchanged on Monday. However, the monetary authority lowered the mortgage rate for first-time buyers.

The Russian invasion of Ukraine began to effectively change the geopolitics of Europe. Countries that historically adopted a neutral geopolitical stance have now decided to join the North Atlantic Treaty Organization (NATO).

the first was Finland, which confirmed yesterday (15) that it will apply to join the military allianceThus, violating its historical policy of neutrality between Western countries and Russia.

The decision came a day after Russian President Vladimir Putin warned Sauli Niinistö, the president of Finland, that the action would be a “mistake”.

Fed Opinions

John Williams, Chairman of the Federal Reserve (Fed, US central bank) in New York and a permanent voting member of the Federal Open Market Committee (FOMC), said he expects a series of hikes in interest rates. In the US, the US central bank is battling strong inflation in the country.

According to him, rising prices is the “number one problem” of the entity, which is largely focused on reducing costs.

Williams, who expects another 50 basis point increase in the federal funds rate in May, said “very complex” factors are affecting supply and demand and interest rates should rise quickly. In the long term, the path of the interest rate will depend on how the economy develops, according to the Central Bank, which expects a significant moderation of inflation in 2023.

Optimistically, Williams said the US economy does not need to weaken for demand levels to fall.
For him, most of the unbalanced sectors can be properly adjusted by the monetary policy actions of the Federal Reserve.

At the same time, he warned that the war in Ukraine will lead to further increases in food prices, while the current fluctuations in the markets are largely the result of external factors.

Therefore, there is a concern about moving quickly in monetary tightening, including shrinking the balance of assets, he explained. For the head of the Federal Reserve Bank of New York, there is no dysfunction in the Treasury market as a result of BC’s actions. (case content).

Petrobras in focus

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