Direct Treasury: After Fed minutes, fixed-rate government bonds offer up to 12% per annum

Direct Treasury: After Fed minutes, fixed-rate government bonds offer up to 12% per annum

General bond prices closed higher on Wednesday (17). In fixed-rate securities, prices rose by 17 basis points, while in inflation papers they rose by up to 11 basis points.

Luciano Costa, Partner and Chief Economist at Monte Bravo Investimentos, explains that the price action came after the Federal Reserve’s Open Market Committee (FOMC) meeting minutes speech, released this afternoon.

According to him, the market was afraid that the Federal Reserve would propose a rate hike of 0.75 percentage points in the next meeting, but the US central bank kept saying that it did not intend to change the “fly plan”. “The Fed indicated in the minutes that it should reach 3.75% at the end of the monetary tightening cycle, but it will slow increases in the short term,” Costa says.

The economist explains that the committee’s consensus is that the US interest rate should continue to rise, but with moderate increases. This will obviously be a sign that the adjustment at the upcoming September meeting will be 0.50 pips. After that, the Fed is likely to make increases of 0.25 or 0.50 at the November and December meetings.

Costa also cites the financial factor that has also put pressure on domestic interest rates. He points out that after adjusting the salaries of civil servants in the judiciary, other categories of civil servants are asking for adjustments, which would generate pressure on the next government.

The prospect of Auxílio Brasil’s R$600 continuation in the next government is also cause for concern.

This Wednesday (17), he also had some important pointers. One was a view of eurozone gross domestic product, which rose 0.6% in the second quarter in the quarterly comparison and 3.9% for the months between April and June 2021, according to a review released. Today by Eurostat, the statistics agency of the European Union (EU).

The result was lower than the expectations of the analysts he consulted The Wall Street Journalwhich they expected to increase by 0.7%.

Inflation figures were highlighted in the domestic scene, with the General Price Index (IGP-10) down 0.69% in August, above the Refinitiv consensus that had expected a 0.60% decline.

Under Treasury Direct, the largest increase was in the price of short-term bonds. The previous Treasury 2025 gave an annualized return of 11.91% higher than the 11.74% seen yesterday.

Fixed rate treasury 2029 and fixed rate treasury 2033, at semi-annual interest, provided annualized returns of 11.85% and 12%, respectively, up from 11.72% and 11.89% recorded in the previous session.

On inflation-linked bonds, interest rates rose between 3 and 11 basis points.

The largest increase was in Treasury IPCA+2026, which provided a real gain of 5.62%, up from 5.51% the day before.

The biggest real gain recorded was 5.87%.

Check prices and quotes for all public securities available for purchase from Treasury Live on Wednesday afternoon (17):

Source: Direct Treasure

Federal Reserve Minutes

The minutes of the last meeting of the US Federal Reserve’s Open Market Committee (FOMC) came in line with what was announced after the latest Fed decision. On August 27, the Fed raised interest rates by 75 basis points. The minutes of the meeting stated that the monetary authority will monitor upcoming indicators of the economy, such as inflation, the labor market and activity indicators. Thus, I’ve left the door open for mods that can be as aggressive as the previous one, or softer in the next encounters.

The document says the decision to follow the data rather than set specific guidance stems from the fear that the Fed will unreasonably raise interest rates.

Some members of the university maintained the rhetoric that the rate could remain at a restricted level for a longer period, to control inflation. Federal Reserve officials also recognize that it may take longer than expected for the price hike to dissipate.

According to the minutes, the meeting participants realized that monetary tightening could slow down the pace of economic growth. However, they saw the return of inflation to the target as critical to the survival of the labor market sustainable.

This year, the US central bank has already raised interest rates by 225 points in total, to a rate between 2.25% and 2.50%. Inflation in the United States, in turn, is the highest in four decades and is three times higher than the target (which is 2%).

Participants in the FOMC meeting noted that the price was around the neutral level and some said a restrictive level might be appropriate.

“With inflation remaining well above the committee’s target, participants judged that a shift to a restrictive policy stance was necessary to fulfill the FOMC’s legislative mandate to promote maximum employment and price stability,” the minutes said.

know more:

FOMC meeting minutes leave open Fed’s next steps; The intensity of the tightening depends on economic indicators

UK inflation

Financial agents are also monitoring inflation figures from the UK. According to the Office for National Statistics (ONS), the Consumer Price Index (CPI) rose 10.1% in July versus 9.4% in June. Experts heard before The The Wall Street Journal Expect a 9.8% increase.

This was the highest inflation rate in more than four decades and the fastest price rise recorded in a wealthy G7 country since the current inflationary pressure began in early 2021.

From the previous month, prices rose 0.6% above analysts’ expectations of 0.4%. Core CPI rose 6.2% in comparison, while expectations were for a 6.0% rise.

Election ceiling and ICMS

In his inaugural address, Minister Alexandre de Moraes, the new President of the Supreme Electoral Tribunal, yesterday (16) defended that electoral justice operates with transparency and that it respects its historic mission of democratization.

Regarding electronic voting machines, the president said that the system will always be improved, a fact that ensures that the result is published on the same day as the vote.

“Brazilians are confidently printing their votes, awaiting the count, and the result being announced on the same day for the security, calm and pride of our voters,” he said.

Moraes will serve a two-year term and succeed Secretary Edson Fachin. The new Vice President is Minister Ricardo Lewandowski.

Also on the political front, the economic team may review the cap on the tax on circulation of goods and services (ICMS), should states prove a loss of revenue, said yesterday (16) Paolo Guedes, Minister of Economy.

He participated in the interstate and union conciliation hearing, promoted by Minister Gilmar Mendes, case rapporteur at the Federal Supreme Court (STF).

Paulo Guedes was not expected to be on the official agenda. During the speech, the minister said that the union units are continuing with full cash and that any loss of revenue with the ICMS cap being set may lead to a review of the proposal.

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