Despite swinging lower for much of the day, DI (interbank deposit) rates eventually reversed and closed slightly higher in Brazil on Tuesday, amid modest declines in Treasury yields abroad and the continuation of the price adjustment movement observed in previous sessions. .
At the end of the afternoon, the DI (Interbank Deposit) rate for January 2025 was at 10.3%, compared to 10.298% in the previous adjustment, while the DI rate for January 2026 was at 10.5%, compared to 10.491% in the previous adjustment. previous adjustment. .
The rate for January 2027 was 10.81%, up from 10.792%, while the rate for January 2028 was 11.085%, up from 11.066%. The January 2031 contract marks 11.47%, versus 11.468%.
After the surge in future rates in the previous two weeks, with the expectation that the Federal Reserve will postpone the interest rate cut and with the worsening perception of fiscal risk in Brazil, investors began to adjust positions in the more recent sessions. recent, which has given some relief to the term curve.
This Tuesday, some data on the North American economy helped to ease the US interest rate curve, which was also reflected in Brazil for much of the session.
S&P Global said its U.S. manufacturing composite purchasing managers’ index (PMI), which tracks the manufacturing and services sectors, fell from 52.1 in March to 50.9 in April. A reading above 50 indicates expansion in the private sector.
The manufacturing sector entered the contraction zone, with the preliminary PMI falling from 51.9 to 49.9. The services index fell from 51.7 to 50.9 in April. Weak data allowed premiums to retreat on the North American and Brazilian curves for much of the day.
“In a sense, today (Tuesday) we have another technical adjustment (in the interest rate curve). The market gave a very strong push last week, pricing in the worst possible scenario for interest rates, and now the curve adjusts a bit,” commented Thiago Lourenço, variable income trader at Manchester Investimentos, in the afternoon, when DI rates were still showing slight declines in Brazil.
According to him, the closing of the Brazilian curve in recent days has already allowed DI rates for January 2025 and January 2026 to get closer to a “short-term target”, although he sees “room to test the 10% region or even a little ‘ under.”
“Ten-year Treasuries also had a good shot last week, but have now stabilized. However, they are unlikely to last that long at a rate as restrictive as the current one, above 4.50%,” Lorenzo added.
Domestically, Tuesday’s news did not have a negative impact on the curve. Federal revenues had a real increase of 7.22% in March compared to the same month of the previous year, standing at 190.611 billion reais, according to the Federal Revenue Agency, marking the best performance in the historical series that began in 1995. In the first quarter, collections had a real increase of 8.36%, to 657.769 billion reais, also a record for the period series.
The text of the tax reform regulation has already been approved by President Luiz Inácio Lula da Silva and is now being prepared to be submitted to Congress.
Despite the relative relief of the last few days and for much of Tuesday’s session, DI rates turned positive in late trading, in line with some recovery in US yields.
Heading into Tuesday’s close, prices were at 87% for a 25 basis point Selic cut in May and 13% for a 50 basis point cut. In previous communications, before the worsening of the scenario, the BC had established forward guidance of a 50 basis point cut at the next meeting. Currently the Selic is at 10.75% per annum.
In the Focus report released this morning, the market changed the projection for the Selic at the end of 2024 from 9.13% to 9.50% and the expectation for the end of 2025 from 8.50% to 9.00%.
In the United States, yields continued to fall, albeit modestly, at the end of the afternoon. According to the CME’s FedWatch tool, implicit Fed Funds data priced in a major probability of an interest rate cut only in September (72.8% probability).
At 4.44pm, the yield on 10-year Treasury bonds, the global benchmark for investment decisions, fell 2 basis points to 4.603%.
Source: Terra
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