08/07/2024 – 18:07
Future interest rates closed close to stability, ending the downward movement that had prevailed throughout the day by the end of the afternoon. The downward adjustment throughout the session was made possible by improved sentiment abroad, after the Japanese government downplayed the risk of further monetary tightening while asset volatility persisted, which ended up bringing relief to the exchange rate and, consequently, to the interest rate curve. The decline began to lose momentum in the afternoon as Treasury yields gained strength.
At the close, the Interbank Deposit (DI) contract rate for January 2025 was at 10.690%, from 10.701% yesterday in the adjustment, and the DI rate for January 2026 was stable at 11.53%. The DI rate for January 2027 had a rate of 11.68%, from 11.69% yesterday in the adjustment. The DI rate for January 2029 was at 11.84%, from 11.83%.
The worsening of the market in the late afternoon was attributed to the zeroing of some intraday positions and, according to professionals on the fixed income desks, attests that the relief in premiums throughout the day was built on fragile foundations. “The dollar saved us today,” said one trader. In the morning, when the currency fell below the R$5.60 level, the drop in rates exceeded 10 basis points, even with the negative surprise of the IGP-DI for July. The index rose 0.83%, above the ceiling of the estimates collected by Projeções Broadcast, which ranged from 0.55% to 0.80%, with a median of 0.68%.
The reaction to the signal from Bank of Japan Vice Governor Shinichi Uchida that the institution will not raise interest rates while markets are unstable set the tone for business throughout most of the session, in the absence of a stronger agenda here and abroad.
In the second stage, Treasury yields renewed highs, which inhibited the closing of domestic rates, which nevertheless maintained a downward signal for much of the afternoon due to the improvement in the exchange rate, a variable that is increasingly gaining weight in market forecasts about the future of the Selic, especially after the release of the Copom minutes.
Nomos’ Investment Director, Beto Saadia, states that the minutes’ hint at the possibility of tightening the Selic rate reassured the market, as reflected in the dollar’s fall and the curve’s design yesterday, with short-term interest rates rising more than long-term interest rates.
To a large extent, skepticism regarding the degree of appreciation of the exchange rate helps to explain the rather partial return of premiums, vis-à-vis the increase in rates yesterday, and the maintenance of bets on a strong increase in the Selic rate in the coming months on the interest rate curve.
In Saadia’s view, only a very large appreciation of the real by the next meeting would be able to avoid a tightening in September, which is quite unlikely. “The ‘higher for longer’ approach does not work for countries with weak currencies. In September, we will have this situation of the Central Bank raising interest rates while the Federal Reserve cuts the rate,” said the director, who predicts a 25 basis point increase in the Selic rate next month.
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