June 13, 2024

Direct treasury: an hour after the business was suspended, interest rates on fixed-rate securities exceed 11% per annum

5 min read
Direct treasury: an hour after the business was suspended, interest rates on fixed-rate securities exceed 11% per annum

São Paulo – After trading was suspended for about an hour, trading on the Tesouro Direto platform resumed with the end of the session, at 5:53 PM. During the economic recovery, the prices of some general fixed-rate bonds rose sharply and reached more than 11% annually. The same is the case with inflation-linked papers in which the real interest has reached 5%.

The comment came for the second day in a row, a reflection of the increased volatility. The purpose of the stop is to ensure that transactions are always conducted at fair rates, in line with the rates followed in the secondary market.

Federal Open Market Committee (FOMC) meeting minutes, where the members of the Federal Reserve (as the central bank of the United States is known) discussed at their meeting in July the beginning of reducing the pace of their monthly bond purchases, indicating that this should be done by the end of this year.

Among fixed-rate bonds, interest paid on papers maturing in 2031 increased from 10.71% before suspension to 11.02% upon return of business. The day before, the same guarantee offered a 10.67% return.

The interest rate on fixed-rate bonds due in 2024 in turn rose from 9.65% to 9.92% after the suspension, up from the 9.59% seen the day before. Meanwhile, the yield on bonds due in 2026 was 10.34% versus 9.97% earlier on Wednesday. Previously, the bond paid a yield of 9.99%.

Inflation-correlated securities maturing in 2035 and 2045 in turn rose from 4.72% before suspension to 4.92% when business returned. The day before, the same security delivered a real return of 4.79%.

The real interest paid by the Treasury IPCA with a maturity of 2055 and the payment of semi-annual interest increased from 4.85% to 4.97%, as negotiations resume. The day before, the same security delivered a real return of 4.89%.

Check the rates and prices of all government bonds available for purchase in the Tesouro Direto that were put up on Wednesday (18), after trading suspended:

direct treasury rates
Source: Tesouro Direto

Brazilian political agenda

The highlight of the local scene is a suggestion Income tax reform which was postponed again yesterday (17) vote. Representatives were uneasy in agreeing to the proposal, especially with the paragraph dealing with taxing dividends at 20%. Parliamentarians defend an amazing thing, but the Ministry of Economy will position itself in the opposite direction. At the same time, state and municipal governments indicate that the text includes revenue losses.

According to a press article State of Sao Paulo, The assessment is that the concessions indicated by the government to open voting on the income tax law are costly, in the opinion of some members of the Ministry of Economy. According to the newspaper, one of the team members would have said that “the renewal has not been paid for in a long time.”

Also on the political front, Minister Aroldo Cedraz asked the Federal Court of Accounts (TCU) more time to analyze the notice for the 5G auction, the newspaper noted. State of Sao Paulo.

According to the newspaper, the government was counting on approving the notice of proposed investment commitments to telecom companies that object to frequencies.

With this, the newspaper informs that there is no deadline for returning the ruling, which could lead to further delays in the auction. The notification was already approved by the National Telecommunications Agency (Anatel) on February 25.

Discussions about the electoral process are also in full swing. Yesterday, the full assembly approved the Presidential Election Commission, which establishes the resumption of alliances in the proportional elections of representatives, by 347 votes to 135 against. Coalitions allow parties to unite into one bloc to contest proportional elections.

The end of coalitions was approved by a 2017 constitutional amendment, aimed at reducing the number of small parties in Brazil. Now, the proposal goes to the Senate, but Rodrigo Pacheco (DEM-MG), the president of the Chamber of Deputies, has already said otherwise.

Investors are also watching for attendance by Bruno Funchal, the Treasury secretary, at the Hybrid Budget Committee, which began Wednesday afternoon. There is an expectation that your letter will bring news that will ease concerns about maintaining the spending cap next year.

International dinner

Meanwhile, in the offshore scenario, the market absorbs the information discussed by members of the Federal Reserve (as the US central bank), at a meeting in July, Begin reducing the pace of their monthly purchases of securities (taper, acronym in English), and to do so by the end of this year. The information was presented on Wednesday in the minutes of the Federal Open Market Committee (Fomc) meeting.

According to the document, officials also made clear that the cut was not a prelude to an imminent rise in interest rates.

“Looking ahead, most respondents noted that as long as the economy is developing to a large extent as they expected, they thought it might be appropriate to start decreasing the pace of asset purchases this year,” the minutes said, adding that the economy that had reached its inflationary target was “About to be satisfied” with the development of employment growth.

Despite this, the minutes show that some members of the group have offset inflation risks beyond the 2% target for longer than expected.

Another market is focusing on the progress of Covid-19 cases. In an interview with the news network CNBCJim Poulsen, Leuthold Group’s head of investment strategy, noted that new Covid cases continue to increase, raising questions about economic reopening. For example, recent US consumer data has been declining, inflation indicators are still high and the Federal Reserve has been indicating a decline in monetary stimulus.

On the economic radar in Europe, the Eurozone CPI rose 2.2% in July on a yearly basis, accelerating from the 1.9% increase in June. The data was provided by the European Union’s statistics agency, Eurostat.

The results confirmed the initial estimate and were in line with the expectations of analysts I consulted The Wall Street Journal.

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