Direct Treasury: A shift in the yield curve on fixed rate bonds rises by up to 6.5% in August;  understand

Direct Treasury: A shift in the yield curve on fixed rate bonds rises by up to 6.5% in August; understand

After recording a sharp drop in public securities prices in July, reaching -9% in some cases, August was marked by a turnaround in the direct treasury. Shares are up 6.5% in value in the month, focusing on the fixed price. The last time bonds rose was in March of this year. The change is related to the role shown in the yield curve.

In July, there was a sharp rise in interest rates, given the perspective prevailing at the time in the market, that the central bank would need to make a tougher adjustment in monetary policy, after August or September, in order to tame inflation. Expectations of higher prices in the coming years only increased.

In August, the situation reversed: the signal from the monetary authority that it was going to end the high Selic cycle at the level of 13.75% per annum gained strength. Additionally, inflation estimates for this year and next have been revised downward.

The result of this combination can be seen in the asset prices. The most valuable securities were the 2029 Fixed Treasuries, which rose 6.48% in August. At the beginning of the month, the reward for this paper was 12.83% per annum, and the price was R$462.22. On Wednesday morning (31), the bond was trading at an interest rate of 12.17% per annum, and the note was found to be priced at R$484.72.

The effect of an increase in stock prices, at times of low interest rates, arises from what is called the market price. While the security is in existence, its price is determined daily according to the daily market rates.

In practice, fixed-rate securities tend to rise when interest rates are in a downtrend. The reverse is also true: bond prices typically fall when interest rates rise, as they have in previous months, while the market has been pricing in a possible continuation of the monetary tightening cycle. So, until maturity, some newspapers have had negative returns at some points this year.

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Prefixes appeared

The change in view regarding monetary policy meant that the bonds that rose the most in August were fixed-rate bonds. Previous Treasury 2033, with semi-annual interest, for example, recorded a 6.32% rise in prices. In his case, the price shown at the beginning of the month was 12.92% per annum and the price was R$851.38. This morning the security offered a yield of 12.31% and the unit price of the note was R$890.26.

It should also be noted that it was the medium- or long-term fixed-rate securities that showed the largest increase in prices. On the other hand, the previous Treasury 2025 saw the price increase by only 2.9%. The explanation is that papers with longer maturities tend to be more sensitive to changes in the economic scenario.

Similarly, inflation-linked bonds showed a lower gain of up to 4.35%. The highlight was Treasury IPCA + 2045. In the previous month, the price of the paper fell by 8.82%.

While rates and prices can vary greatly over time, an investor should keep in mind that he can only incur a loss (or additional gain) from a bond if he redeems it before maturity. If you carry it to the end, the rewards will respect the rates and terms contracted at the time of acquisition.

Check below how the common bonds available for new investments behave in August 2022 and in the last 12 months:

Addresses due date Last 30 days (%) in 2022 (%) at 12 months (%) Purchase Fee (%) Sales rate (%)
advance treasure 01/01/2025 2.9 3.62 3.3 12.14 12.26
advance treasure 01/01/2029 6.48 12.17 12.29
Advance treasury with semi-annual interest 01/01/2033 6.32 12.31 12.43
Selek’s Treasure 01/03/2025 1.19 8.01 10.78 0.08 0.09
Selek’s Treasure 01/03/2027 1.12 8.27 11.13 0.17 0.18
IPCA + Treasury 08/15/2026 0.63 4.65 7.42 5.89 6.01
IPCA + Treasury 05/15/2035 2.41 -2.11 -4.03 5.92 6.04
IPCA + Treasury 05/15/2045 4.35 -9.83 -16.5 5.92 6.04
IPCA + Treasury with semi-annual interest 08/15/2032 1.54 5.89 6.01
IPCA + Treasury with semi-annual interest 08/15/2040 2.28 0.63 -0.5 5.91 6.03
IPCA + Treasury with semi-annual interest 05/15/2055 2.18 -1.53 -4.76 5.98 6.1

Source: Direct Treasury. Amounts withdrawn up to 08/22/31 AD. Note: Securities that do not have a cumulative return in a year or in 12 months are available for a shorter period of time, therefore, there is no calculation of return in the period.

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