2024-03-28 19:50:58
By Fabricio de Castro
SÃO PAULO (Reuters) – DI rates closed on a high on Thursday, following the increase in yields on shorter Treasuries abroad, after a Federal Reserve official stated the day before that there was no rush to cut interest rates in the US, while In Brazil, the market saw no news of impact in the Inflation Report and in the press conference by the president of the Central Bank, Roberto Campos Neto.
At the end of the afternoon, the DI rate for January 2025 was at 9.915%, compared to 9.911% of the previous adjustment, while the DI rate for January 2026 was at 9.91%, compared to 9.893% of the previous adjustment.
The rate for January 2027 was 10.165%, compared to 10.143%, while the rate for January 2028 was 10.47%, compared to 10.436%. The contract for January 2029 marked 10.67%, compared to 10.638%.
On Wednesday night, Fed Director Christopher Waller said there is “no rush” to cut US interest rates at this time. Furthermore, he pointed out that delaying the start of rate cuts will likely affect the size of the easing that will take place in 2024.
“It is appropriate to reduce the overall number of rate cuts or push them further into the future in response to recent data,” Waller said.
“Waller’s speech yesterday was hawk (tough on inflation), with him wanting to look at numbers to have room to cut interest rates. This sets the strong tone today, and the Treasury (yield) also opens a little, which makes the DI rate open here too”, commented the head of the operations desk at C6 Bank, Felipe Garcia, during the afternoon.
In fact, yields rose most sharply among short US bonds, which more directly reflect the outlook for short-term monetary policy in the US.
In Brazil, the external scenario created space for future rates to advance. The DI rate for January 2027 rose 5 basis points at 9:24 am, at the peak of the day.
In addition to abroad, investors monitored the release of the BC Inflation Report and Campos Neto’s press conference, held in São Paulo.
In the document, the monetary authority reiterated the most recent warnings about inflation in Brazil and raised the growth projection for Gross Domestic Product (GDP) in 2024 from 1.7% to 1.9%.
To the press, Campos Neto said that the BC chose to indicate the intensity of the cut in the basic interest rate only for the May meeting of the Monetary Policy Committee (Copom) because the scenario is not clear for longer terms.
“That’s exactly why we removed the ‘forward guidance’, because we don’t have such a clear visibility. When we don’t have such a clear visibility, it is understood that we are a little dependent on the scenario from here to there”, he stated, in response to questions about what the collegiate plans to do about Selic from June onwards.
The Selic base rate is currently at 10.75% per year, and the BC signals a new cut of 50 basis points at the May meeting, leaving the decision open at the June meeting.
Despite the importance of the report and the press conference, the market assessment was that they did not bring substantial news in relation to the scenario outlined by the BC.
During the afternoon, with no major effect on the forward curve, the Treasury reported that the federal public debt rose 2.25% in February compared to January, to 6.595 trillion reais.
Close to closing, the Brazilian forward curve priced in a 95% chance of the Selic base rate cut in May being 50 basis points.
Abroad, at 4:36 pm, the two-year Treasury yield — which reflects bets on the direction of short-term interest rates — was up 6 basis points, at 4.628%.
The yield on the ten-year Treasury — a global reference for investment decisions — rose 1 basis point, to 4.206%.
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