05/31/2024 – 18:09
Future interest rates fell this Friday, 31st, basically motivated by the fall in Treasury yields. Lower inflation numbers in the United States opened space for the market to anticipate bets on rate cuts there, which encouraged the removal of premiums from the curves. On the other hand, the firm rise of the dollar and expectations for the Focus survey on Monday, the 27th, limited the domestic adjustment.
The interest on the interbank deposit contract (DI) for January 2025 fell from 10.429% in the previous adjustment to 10.385% and ended the day at a low. The DI rate for January 2027 fell from 11.239% to 11.140% and the DI rate for January 2029, from 11.729% to 11.640%.
However, the fall in domestic interest rates – of 5 to 10 basis points – was timid compared to the adjustment in Treasuries. Yesterday, when the Brazilian market was closed due to the Corpus Christi holiday, American rates had already dropped between 5 and 7 points, after the slowdown in American GDP renewed hopes for an interest rate cut by the Federal Reserve (Fed). Today, they fell between 4 and 6 points.
The movement was triggered by the release of the consumer spending price index (PCE), the Fed’s preferred measure of inflation. The indicator rose 0.3% in April, compared to March, in line with the market consensus. But the core PCE advanced just 0.2%, against a consensus of 0.3%.
“Treasuries have had a very significant drop in the last two days, and that is what is pulling DIs down”, says the chief economist at Nova Futura Investimentos, Nicolas Borsoi. “But this pace of decline ended up being a little disappointing, given the size of the decline in Treasuries.”
Two main factors prevented a more intense fall. Firstly, the 0.81% increase in the dollar against the real, at R$5.2508 at closing. Secondly, the expectation for the release of the Focus survey, next Monday. Agents assess that there is the possibility of a new round of increased expectations for the IPCA, due to the strong labor market numbers released this week.
Even with today’s drop, the interest rate curve reaches the end of the week with an increase in steepness, showing an increase in the market’s perception of risk. In addition to the increase in inflation expectations, uncertainty regarding the timing of the US interest rate cut, fiscal risk and doubts surrounding the conduct of monetary policy by the Central Bank from 2025 onwards have weighed on the market.
“The trend is still one of uncertainty, especially in the fiscal field, in Brazil, and in relation to monetary policy abroad. This should continue to put pressure on interest rates, even if at a slightly lower intensity than what we saw in the first quarter”, says the multimarket and fixed income manager at Mag Investimentos, Ricardo Jorge.
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