Fiscal risk with PEC for fuels triggers yield curve premiums - ISTOÉ DINHEIRO

The proposal to zero federal taxes on fuel and energy without offsetting the collection made premiums on the domestic yield curve soar this Friday, especially for intermediate maturities ahead. This is because, although it has a disinflationary effect in the short term, the billionaire cost of the measure would harm public coffers in the coming years. And traders commented that the movement was not more abrupt today because US rates fell.

The Interbank Deposit (DI) contract for January 2023 went from 11.892% in the Thursday adjustment to 11.875% (regular) and 11.885% (extended). January 2025 rose from 11.063% to 11.185% (regular) and 11.17% (extended). January 2027 advanced from 11.097% to 11.30% (regular) and 11.305% (extended).

The negative differential between January 2023 and January 2027 rates went from 8.15 points last Friday to 5.75 points this Friday. In practice, this means that the curve has flattened out more, with the short end losing some of the prize and the long end winning.

After almost a week at the mercy of the mood of the other markets – notably the dollar and Treasuries -, today the interest rates were the most relaxed. The agents closely followed the unfolding of the government’s and Congress’ plan to eliminate federal taxes on fuel and energy.

The initial idea would be the zeroing of PIS/Cofins rates on gasoline, diesel and ethanol. The exemption could also reach electricity bills. The impact on the consumer’s pocket in the case of a liter of fuel would be small (between R$ 0.18 and R$ 0.20), but the hole in public accounts, billionaire.

Grupo Estado reporter Adriana Fernandes heard from a member of the economic team the simulations of the two scenarios: with only zero PIS/Cofins for fuels, the loss in revenue is R$ 50 billion; if the measure is extended to electric energy, it reaches at least R$ 57 billion. All without tax compensation.

Throughout the day this Friday, reporters Iander Porcella and Daniel Weterman heard from politicians of all ideological hues admit that the measure, if it goes ahead, must pass Congress. The pressure of being an election year is very strong and, despite being an electoral one, the proposal can be interpreted by the population as a response to the high prices of fuel and energy. “If it presents itself, I think it will approve, but the consequences on public accounts will be enormous”, pondered the vice-president of the Chamber, Marcelo Ramos (without party-AM).

In the short term, the project would be disinflationary, with a potential for a withdrawal of almost 0.9 percentage point in the 2022 IPCA, as reported by reporter Cícero Cotrim. However, the impact on public accounts in the years ahead remains. Hence, the behavior of the curve today, with the rise in longer maturities.

“The Selic rate is around 12%, which in theory will bring inflation to the target in 2023. So the premium has to go somewhere”, highlights the operator of Terra Investimentos Paulo Nepomuceno.

The Minister of Economy, Paulo Guedes, would not be opposing the PEC, as long as the counterpart is the freezing of civil servants’ salaries. But Nepomuceno believes that this alone will not be able to stop the articulation of public servants for readjustments. “We realize that the government has entered a little into populism, that this gets votes. But it is very bad for the inspector, because there is still pressure from the civil service”, says the operator.

The Brazilian curve was still benefited today by the behavior of Treasuries. After the scare on Tuesday, with a jump up to close to 1.9%, the yield of the 10-year T-note ‘calmed down’ and was at 1.75% by late afternoon today.

Next week, the market’s attention will all be focused on the Federal Reserve’s monetary policy decision. The expectation is for a clearer signal regarding the beginning of the interest rate hike – which the market prices in March.

Internally, the agenda is full. Only on Wednesday, there is IPCA-15, external sector and disclosure of the Annual Financing Plan (PAF) by the Treasury.