2023-06-29 21:55:52
© Reuters
By Fabrizio de Castro
SAO PAULO (Reuters) – Interest futures rates ended Thursday at a slight low in Brazil, with investors reverberating abroad, where Treasury yields were rising, and the press conference of Central Bank president Roberto Campos Neto .
Earlier in the day, the bias was upward for rates across the entire forward curve, in the wake of the release of positive data on the US economy.
The US Department of Commerce reported that the country’s Gross Domestic Product (GDP) for the first quarter was revised from an annualized rate of +1.3% to +2.0%. The revision was higher than expected by economists, who projected a rate of +1.4%.
The US Department of Labor reported that initial jobless claims fell by 26,000 in the week ended June 25, to 239,000 in seasonally adjusted data. Economists polled by Reuters had forecast 265,000 claims for the last week.
The North American numbers, which indicate higher-than-expected growth and a still heated job market, raised the perception that the Federal Reserve may be led to raise interest rates even further, currently in the range between 5.00% to 5.25 % per year, to contain inflation.
This reading was reflected in the rise in Treasury yields, with repercussions on the Brazilian forward curve.
Internally, expectations revolved around Campos Neto’s press conference, following the release of the Inflation Report. The report itself brought little news in relation to the communiqué and the minutes of the BC’s Monetary Policy Committee (Copom), released in previous days. But Campos Neto addressed aspects of the most recent communication from the monetary authority at the press conference.
Campos Neto defended the BC, explaining the change in tone between the communiqué and the Copom minutes, but acknowledged that the first document generated noise in the financial market, even though it did not significantly affect expectations for interest rates.
“When you have a divided meeting situation and you have to write a short consensus opinion, you can’t write much”, commented Campos Neto. “The communiqué, in our opinion, had left the door open, but there was a lot of noise about it,” he added.
In practice, Campos Neto’s speech made it even clearer that the door is open for a cut in the basic Selic rate, currently at 13.75% per annum, in August. He did not commit, however, to any type of action in this regard, nor to the size of the eventual cut.
“The word ‘parsimony’, we talk about the next steps”, said Campos Neto, in relation to the term used in the minutes. “I can’t say what will be done”, he added. of the Central Bank, investors were waiting for the outcome of this Thursday’s meeting of the National Monetary Council (CMN).
On Wednesday night, in an interview with GloboNews, the Minister of Finance, Fernando Haddad, confirmed the maintenance of the 3% inflation target for 2024, but signaled his intention to change the horizon to reach the objective. He defended that the calendar year should not be the reference for the BC to reach the inflation target, but that there should be a continuous target, to be pursued over the years.
In this Thursday’s interview, Campos Neto said that the end of the calendar year would represent an interesting improvement for the targets regime, but said that he could not anticipate his vote in the CMN on the issue.
The collegiate is formed by Campos Neto, Haddad and the Minister of Planning and Budget, Simone Tebet. Each of them is entitled to one vote on decisions.
In a radio interview this Thursday morning, President Luiz Inácio Lula da Silva again said that “there is no explanation” for the current Selic level and said he hoped that Haddad and Tebet would have “all the maturity” to make the necessary decision in the future. CMN.
Haddad called an interview for 5:15 pm, but it was not clear if the decision on the target will be announced at that time. CMN votes are usually communicated after 6 pm.
Amidst the expectation that the Copom will actually start the process of cutting the Selic in August, future rates end at a low level.
In the afternoon, the pricing on the curve for the August meeting had a 94% chance of cutting the Selic rate by 0.25 percentage points. The other 6% are for a 0.50 percentage point cut in the basic rate.
By late afternoon, the DI rate for January 2024 was at 12.935%, compared to 12.962% in the previous adjustment, while the DI rate for January 2025 was at 10.885%, compared to 10.977% in the previous adjustment. Among longer contracts, the rate for January 2026 was at 10.265%, compared to 10.349% in the previous adjustment, and the rate for January 2027 was 10.31%, compared to 10.372%. of Treasuries remained positive.
At 4:41 pm (Brasília time), the ten-year Treasury yield – a global benchmark for investment decisions – rose 14.00 basis points, to 3.852%.
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