Interest: Rates are between stability and slightly high, amid the debate on target
The interest rate market operated without a defined trend, with moderate oscillations, and alternating upward and downward biases. At the close, long rates were on the sidelines and others were up moderately. Although the subject that marked the week – the possible change in the inflation targets -, today there was no news, the possibility of the president of the Central Bank (BC), Roberto Campos Neto, having acceded to the government’s pressure to change the objective keeps the uncomfortable market to take risks. In a context of a new round of increases in Treasury yields, the Monthly Services Survey (PMS) above expectations and the decision by Minister Luiz Fux, of the Federal Supreme Court (STF), on charging ICMS on energy tariffs, caution was the watchword.
The rate of the Interbank Deposit (DI) contract for January 2024 closed at 13.46%, from 13.42% yesterday in the adjustment, and the DI for January 2025 increased from 12.86% to 12.92%. The DI for January 2027 ended stable at 13.12%, and the DI for January 2029 was 13.40%, from 13.45%.
In the week’s balance sheet, short rates fell by around 30 basis points and long rates rose by just over 10 points compared to last Friday’s adjustments, in a configuration more inclined to the curve, precisely reflecting the worsening of risk perception for Brazil, of political interference in the work of the Central Bank. There is a consensus among economists that the debate on the targets takes place in bad timing and that an eventual increase will further unanchor expectations in view of targets already adjusted upwards, requiring a resumption of the monetary tightening.
For Igor Seixas, a partner at Inove Investimentos, although rates have not necessarily risen today, the market continued to be under stress involving not only the issue of targets but also other factors, such as the decision of the STF on the breaking of definitive decisions on tax issues, and without modulation. “After a high day like yesterday’s, today it would be normal for us to see a correction. Just not having had this adjustment in rates today is already very bad”, he evaluates. Regarding the decision of the STF, Seixas points out that it brings legal uncertainty to companies, further increasing the country risk.
The Secretary for Economic Policy at the Ministry of Finance, Guilherme Mello, said this afternoon that the portfolio did not guide the debate on changing the target.
In this context, there is great expectation for Campos Neto’s participation in the Roda Viva program, on Monday night, amid pressure for him to go to Congress to explain why prices are high. The market wants to know if he will confirm that he would have agreed to an adjustment in the targets, remembering that the information that circulated yesterday in the press has not been disallowed by the Central Bank so far.
Greater relief in rates also came up against Minister Luiz Fux’s decision to suspend changes in the ICMS calculation base, on electricity, last night. Warren Rena calculates an impact of up to 15 basis points in 2023, for which future expectations are already quite unanchored. The decision is preliminary in nature and still needs to be confirmed by the full Court.
Overseas, Treasury rates rose further, with the T-Note returning as high as 3.74% by late afternoon. Yet another activity indicator outperformed the forecast consensus, reinforcing the idea that there may be no room for interest rates to drop in the United States in 2023. The University of Michigan consumer sentiment index rose from 64.9 in January to 66, 4 in the February preliminary reading. Analysts had expected 65.1.
Internally, the volume of services provided in the country in December rose 3.1%, surpassing the ceiling of estimates, of 2.2%, according to Projeções Broadcast. The sector renewed the record of the historical series in the month, indicating an even more challenging scenario for the monetary policy via inflation of services.