Direct Treasury: After two suspensions, fixed interest exceeds 13%; Lula’s speech leaves the market on alert

Public bond negotiations over Treasury Direct resumed at approximately 4:50 p.m. this Thursday (10). The session was marked by a suspension of work: one at noon and one at noon today. Today there was strong turmoil, with the rise of the dollar and the collapse of the Brazilian stock exchange.

When there are strong price and rate fluctuations, the treasury temporarily suspends sales and purchases to prevent the investor from temporarily closing transactions at a price that can quickly be delayed.

On the financial side, solutions that go beyond the spending cap to make the former Bolsa Família of R$600 per month viable are becoming a cause for concern. In addition, the speech of Luis Inacio Lula da Silva (PT), the elected president of journalists, had a bad effect. On this occasion, Lula defended a broader economic discussion, which takes not only the financial issue into account, but also the dignity of the population and equal opportunity for citizens.

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🇧🇷 Direct Treasury: Financial risks, IPCA weights and bond prices rising; Is it time to buy more or sell?

“The market is nervous and insecure about the direction of the Lula government and fiscal policy. When the government takes over, it is normal for it to rein in economic policy, with some adjustments. But the president-elect does the opposite and creates panic in the market,” says Julio Hegedos, chief economist at Mirae Asset Company.

For Luciano Costa, chief economist and partner at Monte Bravo Investimentos, the government now has to act on two fronts, so that the market has peace of mind: defining the name of who will run the Ministry of Finance and creating a PEC, which will ensure continuity. From the minimum benefit of R$600 from Auxílio Brasil, within the financial parameters.

You are National Consumer Price Index data (IPCA) is also on the radar. Inflation rose 0.59% in October on a monthly basis. The number was much higher than expected by the market, which had forecast a positive monthly variance of 0.48%, according to the Refinitiv consensus.

When business returns, just before 5 p.m., the general bond market operates with a huge price hike. At the time, the highlight was Treasury 2033 fixed rate notes, with a semi-annual coupon, which saw interest rise from 12.17% in the previous session to 13.17% annually today.

Among the inflation-related papers, all rates were above 6% per year. The highest real wage was offered by IPCA + 2045 Treasury, at 6.15% per annum. The value is higher than the 5.92% seen the day before, but lower than the 6.27% recorded at the start of work.

Trading on Treasury IPCA + 2055 has been suspended since yesterday. The interruption is the result of paying the semi-annual coupon scheduled for next Wednesday (16).

Treasury Direct typically prohibits the purchase of securities four business days before interest coupons are paid. In addition, the repurchase of such securities will also be suspended from the two business days before the coupon is paid.

Check rates and rates for public bonds available for purchase when Treasury Direct returns on Thursday (10):

transition

Vice-President-elect, Geraldo Alckmin (PSB), announced Thursday noon (10) new names that will participate in the government’s transition team.

Thirty-six members were nominated from seven thematic groups: Communication; human rights; racial equality; planning, budgeting and management; industry, commerce and services; Small businesses and women.

Among the announced names, attention was drawn to the personality of Guido Mantega, who was the country’s longest-lived Finance Minister (2006-2014) and who also held the Ministry of Planning (2003-2004). The economist should be part of the team that will focus on the budget discussion.

Alckmin previously said that the names that the transition team will compose will not necessarily be ministers, but the market is trying to search for clues about the leadership of the Treasury in the next government.

Financial agents have renewed concerns about campaign promises that may be outside the spending cap, such as the R$600 Bolsa Família, as of January. The planned expenditures will be around R$175 billion next year, which will make room for the R$105 billion reserved for the program in the 2023 budget to be reallocated to cover other expenses championed by the Labor candidate during the campaign.

In a report, XP analysts highlighted that the proposal “bypassed” the alternative designs that were under discussion immediately after the second round. For the next year, the recommendation of the technicians from the transition team is that the text states that income must be compensated in the event of an increase in expenses with the program and a return to the target.

“The proposal has strong appeal to Congress because it is easy to understand and with an argument that is difficult for parliamentarians to counter (removing restrictions on spending on income transfers),” XP experts added in a note, although they consider that there is some resistance on Centão’s part to giving “a check on blanks” for the new government.

Brokerage specialists indicate that the president-elect, Luiz Inacio Lula da Silva (PT), will hold, this Thursday, the first meeting with the leaders of the congressional seats to test the acceptance of this proposal.

“Adjustments are possible, but it will take quick and vigorous feedback to show that a complete withdrawal of the social program from the spending cap may not be the best approach,” the experts ponder.

In an interview with journalists, Lula defended a broader economic discussion, which takes into account not only the financial issue, but also the dignity of the population and equal opportunities for citizens.

Why are people forced to suffer because of ensuring such financial stability in this country? Why do people say all the time ‘we need to cut spending, we need a surplus, we need to cap expenditures’, he wondered?

Amindo: Why don’t the same people seriously discussing the spending cap discuss the social issue of this country? Why shouldn’t the poor be at the macroeconomic table? Why do we have an inflation target and not a growth target? Why not establish a new model for how this country works? “.

IPCA

Domestically, the highlight is the October inflation figures. According to the Brazilian Institute of Geography and Statistics (IBGE), the 12-month cumulative IPCA rate was 6.47%. In the year, the index was at 4.70%.

The monthly rise came in above market expectations, with a contraction of 0.48% in October and 6.34% in 12 months, according to the Refinitiv consensus.

Of the nine groups of products and services surveyed by the International Statistical Institute, eight showed an increase in October. The largest contribution during the month, 0.16 percentage point (pp), came from foods and beverages (+0.72%), which decreased by 0.51% in September.

Transportation, which went from a contraction of 1.98% in September to a rise of 0.58% in October, was highlighted by lower fuel prices (-1.27%), which were much less intense than in the previous month (-8.50%) .

Gasoline (-1.56%), diesel oil (-2.19%) and vehicle gas (-1.21%) continued to decline, while ethanol registered an increase of 1.34%. In addition, there was a significant increase in airfares (+27.38%), and a larger individual contribution to the IPCA for October (0.16 pg).

Although the index provided some negative surprises, Oliveira, of MAG Investimentos, highlights that core inflation metrics continued to slow in the inter-annual data and that services inflation came in below expectations (+0.67%), suggesting that policy tightening is underway. cash happens. effect on prices.

“For the coming months, expectations are for a slowdown in industrial goods and services inflation, which should allow to maintain the 12-month cumulative IPCA movement,” the economist highlights.

United State

Most notable in the US scene is the Consumer Price Index, which rose 0.4% in October, compared to September, according to seasonally adjusted data released this Thursday (10) by the US Department of Labor.

As a result, consumer inflation reached 7.7% in 12 months. This was the smallest increase in 12 months since the period ending in January 2022.

Both the monthly and annual measurements came in below market expectations. The Refinitiv consensus indicated an increase of 0.6% from September and 8.0% in 12 months.

Core inflation, which excludes changes in food and energy prices, rose 0.3% in October, after rising 0.6% in September. In 12 months, it is up 6.3%.

The energy index is up 17.6% in the twelve months ending in October, and the food index is up 10.9% from a year ago. These increases were lower than in the period ending in September.

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