Direct Treasury: interest on fixed-rate public bonds enters the second session of the increase and reaches 12.02%

Direct Treasury: interest on fixed-rate public bonds enters the second session of the increase and reaches 12.02%

Thursday’s session (18) is marked by more rhetoric from Federal Reserve leaders (the Federal Reserve and the US central bank), which may balance the mood of financial agents and point to a clearer path for US interest rates this year.

On the previous day (17), part of the market read the minutes of the last meeting of the Open Market Committee (FOMC) as follows doves (Less inclined to monetary tightening).

The implications of this reading didn’t take long to show: Federal Reserve fund futures showed this morning that there is a 63.5% chance the monetary authority will raise interest rates by 0.50 percentage points at the September meeting. A week ago, the chance of a rally at that level was 57.0%, according to CME Group.

But the assessment that the Fed could slow the pace of rate hikes is still not consensual. For this reason, the market is awaiting more clues in the speeches scheduled for today, along with the presentation of unemployment insurance and used home sales data.

Inflation figures are also prominent in Europe. Eurozone CPI rose 8.9% in the 12 months to July – hitting a new all-time high.

Domestically, the market is also watching negotiations between states and the union regarding losses to collect after the ICMS exemption, as well as the impact that a potential 18% increase in judiciary salaries could have on public accounts.

At Treasury Direct, the interest offered by general bonds is working in a mixed fashion this morning. Fixed-rate bonds reported a slight increase in yields, while inflation-linked bonds showed a decline in their rates.

The highest interest rates offered by the fixed rate at 9:20 am on paper were due in 2033, at 12.02% per annum, which is a slight advance compared to the 12% per annum recorded the day before (17).

Inflation-related papers show the opposite movement. The biggest declines were recorded in the IPCA+ 2035 and 2045 Treasuries, which saw real yields drop from 5.81% to 5.77% annually, in today’s first update.

Check prices and quotes for all public securities available for purchase from Treasury Direct on Thursday morning (18):

Source: Direct Treasure

Commodities and inflation in Europe

Focusing on the next steps by the monetary authorities, investors reflect on CPI data from the Eurozone. According to Eurostat, the European Union’s statistics agency, the consumer price index rose 8.9% in the past 12 months and 0.1% in July in a monthly comparison.

Both results were in line with the expectations of analysts I consulted The Wall Street Journal.

Only the bloc’s core CPI – which ignores energy and food prices – posted a 4% annual gain in July, confirming an earlier estimate. Compared to June, the core index fell 0.2% last month.

Also pay attention to commodity prices. Oil futures were trading higher around 9:30 AM (Brazil time). Brent rose 1.37% to $94.99, while WTI rose 1.16% to $89.13.

Judicial adjustment, Brazil aid and fuel

In the political arena, the 18% readjustment in the salaries of the judiciary could have effects on the order of R$1.8 billion in 2023, R$5.5 billion in 2024, and R$6.3 billion from 2025 onwards for the Federation, According to the Independent newspaper’s calculations. The Financial Institution (IFI) of the Federal Senate.

The proposal from the Federal Supreme Court (STF) to readjust the salaries of the judiciary has further complicated the preparation of the draft 2023 budget, which must be sent to the National Congress within two weeks.

Also in the political sphere, Paulo Guedes, Minister of Economy, said that in order to preserve the extra R$200 aid next year, “it is enough to approve tax reform one day after the elections.”

Still on the benefit’s continuation, Guedes said one possibility is to correct the cap on income tax exemption, dividend tax and dividends.

The minister also stated, during an event hosted by TAG Investimentos, that until then, additional expenses, including those related to emergency aid, will be covered by the extraordinary income.

Focusing on a new term, President Jair Bolsonaro (PL) said yesterday (17) that he spoke with part of the economic team and included in the budget maintaining zero federal taxes on gasoline, diesel, alcohol and cooking gas in 2023.

At an event with mayors in Brasilia, the re-election candidate said he is negotiating with the Economy Ministry about the possibility of federal tax cuts also on aviation kerosene.

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