2023-07-05 22:19:06
The pressure was moderate for most of the day, but increased after the Federal Reserve minutes were released in mid-afternoon.
Future interest rates closed at an all-time high, spurred by the foreign market while the market awaited the development of economic agendas in the Chamber. The pressure was moderate for most of the day, but grew after the release of the Federal Reserve’s minutes, in the middle of the afternoon, which also increased the pressure on the American curve and on the exchange rate. The document, considered “hawkish”, reinforced the perception of a new increase in interest rates in the United States. In Brazil, the government accelerated the tax reform negotiations and the mayor, Arthur Lira (PP-AL), said that the intention is to start voting tomorrow.
The Interbank Deposit (DI) contract rate for January 2024 closed at a maximum of 12.82%, from 12.783% yesterday in the adjustment, and the DI for January 2025 increased from 10.70% to 10.78%. The DI for January 2027 ended with a rate of 10.23%, 10.07%, and the DI for January 2029, with a rate of 10.59%, 10.42%.
The market operated on the back burner for most of the session, but sustaining an upward bias since the opening, in the wake of profit-taking that started yesterday, since the external environment was risk averse after weak activity data in Europe and in China. Investors were waiting for the Fed’s minutes, which would be released at 3:00 pm, while following the news about the matters in the Chamber, on a day when the local agenda was empty of indicators.
The minutes confirmed the perception that the monetary authority should raise interest rates again at the July meeting. Leaders said they remained extremely attentive to the risks of inflation, which remained high. They acknowledged that inflation has eased since the middle of last year, but recent readings for core price inflation from the Consumer Expenditure Index (PCE) have changed little. In addition, the document revealed that some leaders indicated that they were in favor of raising the fed funds rate by 25 basis points at the last meeting.
“Fed documents have always been hawkish, but Powell’s speeches have not. Today there was no Powell. So, looking at the minutes, there are two more interest rate hikes in the United States. According to Powell’s recent speeches, it will be just one more”, says the chief economist at B.Side Investimentos, Helena Veronese, referring to the president of the Fed, Jerome Powell.
On the American curve, the yield of the ten-year T-Note reached a maximum of 3.94%, from 3.85% at the end of Monday afternoon – yesterday the market was closed, and the T-Note of two years, high of 4.95%, of 4.92%.
At XP Investimentos, economist Francisco Nobre says that the minutes did not change the general picture that points out that the end of the tightening cycle is approaching, “although monetary policy should remain restrictive for longer amid persistently high inflation and the labor market tight”. “A new interest rate hike will not significantly change the trajectory of the US economy or asset prices,” he comments in a report.
CONTINUE AFTER ADVERTISING
According to Veronese, the DI market in Brazil followed the reaction of the assets abroad, “because we didn’t have anything concrete here”. “The curve still has room for some correction, but it continues to price expectations of a significant Selic cut,” he said.
The movement of yesterday and today, therefore, is considered more as a breather for the market, which recomposes part of the premiums while also waiting for the outcome of the votes in the Chamber and for the next inflation data. Arthur Lira stated that he is working to start the discussion on the tax proposal today and vote on the matter tomorrow night in the first round. He articulates so that the reform can be voted on before the PL of Carf.
At the fixed income tables, the assessment is that the approval of the tax in the Chamber may even occur before the parliamentary recess, on the 15th, but an approval later this week, given the conflicts in negotiations with governors and economic sectors, would still not be possible. fully priced. If it comes to fruition, there is a lot of room for closing the curve, also depending on what is adjusted in the text.
Estadão content
CONTINUE AFTER ADVERTISING
#Rates #rise #line #curve #deadlocks #House #agenda