Interest rates fall with falling returns on Treasuries, gasoline and IBC-Br By Estadão Conteúdo

2023-10-21 11:00:26

© Reuters. Interest rates fall with falling returns on Treasuries, gasoline and IBC-Br

Future interest rates closed this Friday’s session falling, after three days of increases, in a truce determined by the external scenario and also by domestic factors. Rates fell along with the relief in the Treasuries curve and the fall in the . The announcement of a reduction in gasoline prices and the decline in the IBC-Br in August greater than consensus estimates also helped in the movement. The return of premiums, however, was moderate given the significant increases recorded during the week, so much so that, in relation to last Friday, rates rose, with an increase in the slope of the curve.

The Interbank Deposit (DI) contract rate for January 2025 closed at 11.075%, from 11.175% in Thursday’s adjustment, and the DI for January 2026 fell from 11.15% to 11.03%. The DI for January 2027 projected a rate of 11.21% at closing (11.33% on Thursday) and the DI for January 2029, a rate of 11.64% (11.71% on Thursday). In the balance of the week, short-term maturities advanced around 8 points and intermediate and long-term maturities, around 20 points.

Investors had already been trying to grab some of the premiums embedded in the curve in recent days, but without success, overwhelmed by the spike in Treasury interest rates. This Friday, this search was made possible by the pause in the upward trajectory of yields. The ten-year T-Note rate, which flirted with the 5% mark on Thursday, returned to 4.92% in the late afternoon, a level still very high, but still a breather for local rates. “It’s much more of a technical adjustment than a foundation on this long end, with outside help”, says MAG Investimentos economist Felipe Rodrigo de Oliveira.

Also in Treasuries there was a correction movement mixed with a little risk aversion, via flight to quality, amid the growth of geopolitical fears with the Israel-Hamas war and the possible effects on the US economy of the “higher for longer” in the Federal Reserve’s monetary policy. Oil prices also declined, supported by technical adjustments after the week’s highs and the US government’s announcement that it will replenish its strategic stocks.

The domestic news this Friday focused on the behavior of local rates. Both the announcement of a 4% reduction in gasoline prices starting on Saturday and the weak performance of the IBC-Br endorse the assessment that the Copom is able to continue cutting the Selic by 0.5 percentage points in the next meetings, at a time in which the bets for a slowdown in the pace were growing.

The decision by Petrobras (BVMF:), based on the upward lag in domestic prices, surprised the market due to its timing. “A cut was not expected now given the rise in the dollar and oil. It remains to be seen whether it will be sustainable, given that the commodity, depending on the developments of the crisis in the Middle East, could quickly return to US$ 100, which would have an impact both in US inflation and in Fed policy. It is a risk to be monitored”, says the chief strategist at Banco Mizuho (NYSE:), Luciano Rostagno.

In any case, the downward adjustment increases the IPCA expectation at the target this year. Research from Projeções Broadcast shows that the median for the index fell below 4.75% for the first time – the upper limit of the inflation target. The August IBC-Br fell 0.77%, more than the median forecast, of -0.60%, collected by Projeções Broadcast, reinforcing the scenario of economic weakness in the third quarter.