02/02/2024 – 18:45
The week ended with a rise in future interest rates and a gain in the slope of the curve, both in relation to yesterday and Friday of last week, as long rates rose at a greater magnitude than the others. January's North American employment report trampled on interest rate cuts by the Federal Reserve in the short term, bringing a strong adjustment to the Treasuries curve, which contaminated interest rates and exchange rates in Brazil.
The Interbank Deposit (DI) contract rate for January 2025 closed at 9.965%, from 9.934% yesterday in the adjustment, and the DI for January 2026 rose from 9.60% to 9.68%. The DI for January 2027 ended at a rate of 9.83% (from 9.74%) and the DI for January 2029 advanced to 10.28%, from 10.18%.
Not only did the creation of payroll jobs (353 thousand) far exceed the ceiling of market estimates (290 thousand), but salaries also rose more than the median forecast indicated. The unemployment rate did not rise to 3.8% as expected, but remained at 3.7%.
On Wednesday, Fed President Jerome Powell had already warned that it was unlikely that the monetary easing cycle would begin in March, but the market wanted to wait for the payroll to confirm. Today's combo further undermines the bet on an interest rate cut next month, and even threatens the perception of May as the most likely meeting.
According to the CME tool, at the end of the afternoon, the chance of maintaining interest rates in March was almost 80%, from 62% yesterday, and the chance of a cut in May fell from 93.9% to 71.2%.
Economists had been harboring a feeling that the beginning of interest rate cuts in the United States could open an opportunity for the Copom to go further in the Selic loosening cycle, taking the terminal rate below 9%. For André Alírio, fixed income and fund distribution manager at Nova Futura Investimentos, what can be said for now is that this situation in the US makes an acceleration in the rate of decline in the Selic more unlikely. “The BC would only give 0.75 points in a more benign external situation. What we saw today validates Copom’s idea of cutting the dose by 0.5 points”, he states.
For economist André Perfeito, to resolve the distortion of the North American interest curve, which is negatively inclined, either long interest rates rise or short interest rates fall. “As the market saw no room for long interest rates to rise, it bet on a fall in short interest rates, but seeing now that activity persists in the positive field, the 'solution' for the curve will once again be a rise in long interest rates”, says the economist , for whom a scenario of higher long interest rates and stopped short interest rates seems to be confirming itself. “If this hypothesis is confirmed, the Copom may have more limited space to cut interest rates due to slightly more restricted global liquidity”, says Perfeito, who has Selic at 9.75% at the end of the cycle.
At the end of the afternoon, the return on the 2-year T-Note was at 4.36% and the return on the ten-year T-Note was back above 4%, at 4.02%, with a maximum at 4.05% .
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