Treasury Direct: after two suspensions, fixed-rate securities are back trading at rates of up to 13.32% per year

Friday (11) closes a week full of “excitement” in the bond markets. Following the example of Thursday (10), trading in Treasury Direct bonds was interrupted twice today, due to the strong volatility of prices and rates.

When this happens, the Treasury temporarily suspends sales and purchases to prevent the investor from temporarily closing transactions at a price that could quickly lag.

Yesterday, statements by President-elect Luiz Inácio Lula da Silva (PT), suggesting less fiscal rigor than expected, triggered a climate of panic among financial agents. Interest rates rose in the markets and reflected in the remuneration of public securities in the Treasury Direct. Rates went up—only went down later in the day, in a late 6pm price update.

Today, rates opened again rising, triggering the suspension mechanism early in the morning. At reopening, the rise had softened, but was suspended again around 3 pm. In the last update at 15:20, they were still above those of Thursday, but advancing at a slower pace.

The deceleration came after a statement made by Wellington Dias (PT-PI) and Randolfe Rodrigues (Rede-AP), who confirmed that the announcement of the text of the Transition PEC should be postponed until after the holiday, on Thursday (17). “Now is not the time, the PEC is not mature enough”, said Rodrigues, according to the CNN Brazil🇧🇷

PT president Gleisi Hoffmann, one of the members of the elected government’s transition commission, spoke about Lula’s statement yesterday, who had said that fiscal stability cannot be achieved at the expense of people’s suffering. “The market doesn’t need to worry about Lula, because it knows how he works with public finances,” she said.

If the objective was to calm the market, the PT president’s statement was not successful, according to Ricardo Jorge, a fixed income specialist and partner at Quantzed. For him, Gleisi tried to justify Lula’s words, but the market did not find in the speech something that made sense.

“The market remains under pressure today, but with a smaller magnitude than seen the day before. We do not know how the Central Bank will act in relation to a possible fiscal crisis and inflationary risk going forward. The questions are many. There are doubts about what and how it will be approved. This justifies today’s volatility”, explains the expert.

The repercussion of the turmoil can also be seen in a Citi report, released today. The institution cut the exposure to risks in Brazil and analyzes which market may have been wrong in relation to the president-elect. The comment came after Brazilian assets plummeted on Thursday, penalized by fears of fiscal uncontrolled during the PT government.

In the 3:20 pm update, the rates offered by public securities in the Treasury Direct were up to 35 basis points (0.35 percentage points), below the rise recorded earlier in the day, when interest rates rose to 67 basis points (0 .67 percentage point).

Fixed rate papers, for example, offered interest starting at 13.24% per year. Such return was delivered by the 2033 Prefixed Treasury. The day before, the rate was 12.89%.

Among inflation-linked papers, the highest return was 6.12%, delivered by the Treasury IPCA+2032 and Treasury IPCA+2045, with half-yearly interest, at the same time. The percentage is lower than the 6.15% seen in the IPCA+2032 Treasury and 6.19% delivered by the IPCA+2045 Treasury the day before.

The IPCA+ 2055 Treasury negotiations have been suspended since last Wednesday (9). The interruption is the result of the payment of the semi-annual coupon, scheduled for next Wednesday (16).

Treasury Direct usually prohibits the purchase of the security four business days before the payment of interest coupons. In addition, the repurchase of these securities will also be suspended from the two business days prior to payment of the coupon.

Check out the prices and rates of public securities available for purchase on the return of business at Treasury Direct this Friday afternoon (11):

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