DI rates rise more than 40 basis points due to mistrust in fiscal authorities and lower liquidity

After two days of constant decline, DI contract rates closed sharply higher on Monday, above 40 basis points on some maturities, in a context of persistent market mistrust towards the Lula government’s fiscal policy and the advance of revenues of the Treasury abroad.

Given that the Brazilian market will be closed on Tuesday and Wednesday due to Christmas, liquidity was also affected this Monday by the increase in the dollar which approached 6.20 reais.

At the end of the afternoon, the DI (Interbank Deposit) rate for January 2026 was 15.215%, compared to 14.903% in the previous adjustment. The contract rate for January 2027 was 15.44%, up 45 basis points from the 14.992% adjustment.

Among longer contracts, the January 2031 rate was 14.63%, up from 14.244% in the previous adjustment, and the January 2033 contract had a rate of 14.38%, up 37 basis points from the 14.013%.

Future rates fell in Brazil on Thursday and Friday as the fiscal package advanced through Congress, with the market also reacting to what was seen as positive by President Luiz Inácio Lula da Silva.

This Monday, package concerns once again impacted both the DI and the exchange rate. The move occurred without any new tax developments, even though Congress is in recess until February.

“(There is a) generalized opening of the rate curve, (because) there is still a lot of concern on the market regarding the fiscal scenario,” assessed Henrique Cavalcante, analyst at Empiricus, adding that the external scenario also contributed to supporting the increase in premiums in Brazil.

Treasury yields rose early, driven by the perception that the Federal Reserve is likely to be more measured in its process of cutting interest rates in 2025.

In the afternoon, DI rates returned to highs on some maturities, with traders interviewed by Reuters pointing out that reduced liquidity before the Christmas period favored greater fluctuations.

At 3:38 pm, the DI rate for January 2028 hit a high of 15.28%, up 50 basis points from Friday’s adjustment. In the same period, the dollar also reached daily highs, fluctuating above 6.20 reais.

At the close, the Brazilian curve was pricing in a 99% chance of a 125 basis point increase in the Selic base rate in January, versus a 1% chance of just a 100 basis point increase. Selic is currently at 12.25% per annum.

In the morning, the Central Bank’s Focus survey showed that inflation expectations are increasingly unanchored. The market projection for the HICP increase in 2024 went from 4.89% to 4.91% and in 2025 it went from 4.60% to 4.84% – in both cases well above the The continuous inflation target pursued by the BC is 3%.

According to Focus, the projection for the Selic at the end of 2025 has jumped from 14.00% to 14.75%, even if expectations for the government’s primary result next year have gone from a deficit of 0.64% of GDP gross domestic product at a deficit of 0.60%.

Abroad, yields continued to rise steadily late this afternoon, following the auction of two-year bonds promoted by the US Treasury. As of 4:37 p.m., the two-year Treasury yield — which reflects bets on the direction of short-term interest rates — was up 4 basis points at 4.347%. The yield on the 10-year bond, the global benchmark for investment decisions, rose by 7 basis points to 4.595%.

Source: Terra

Rose

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