Futures interest rates closed higher in the intermediate and long halves, under pressure from global risk aversion as a result of escalation of the crisis between Russia and the West in the Ukraine issue, Treasury auctions, with a greater supply of longer papers than previous ones, and exchange rate depreciation. Low rates were steady in a day of empty internal agenda and news.
The Interbank Deposit (DI) rate for January 2023 closed at 12.405% (regular) and 12.38% (expanded), in adjustments from 12.383% yesterday, and the DI rate for January 2025 increased from 11.371% to 11.455% (regular and extended) happened. ) DI for Jan 2027 increased from 11.22% to 11.33% (Regular & Expanded).
The behavior of the rates at the opening was even more calm, but already in the middle of the morning they began to rise with the news about geopolitical tensions in Eastern Europe. The United States and NATO said that Russia did not partially withdraw troops from the border with Ukraine, as it said, but instead increased its military forces in the region, contrary to its pro-diplomacy speech. Nevertheless, it would have expelled the US deputy ambassador to Moscow. The US government again spoke of an imminent invasion, a sentiment that escalated in the afternoon with reports of bombings in eastern Ukraine. The risk aversion spread is pulling the long end up.
Another borrowing pressure came from the Treasury, which increased NTN-F lots from 900 thousand last week to 2.8 million today, an offer almost completely sold (2.741 million). According to Renasenka DTVM, the risk (DV01) increased by 30% compared to last week’s operation. The Treasury also sold 6.850 million LTN.
On Twitter, derivatives expert and FIA professor Alexandre Cabral said it was the largest fixed rate auction of 2022, with financial volume of R$7.75 billion. “Maturity came out with the highest rate of the year”, he said, adding that a lot of papers for 2029 came out with rates lower than the consensus.
The short vertices had very limited oscillation due to the lack of trigger for the trades. Bets for the next Copom meeting appear to be well-adjusted for an increase of 1 percentage point from the current Celik of 10.75% with some chips in the 1.25 option. “There is no way for BC to escape what it has established in its flight plan”, warned Banco Mizuho chief strategist Luciano Rostagno, however, adding that the geopolitical landscape is a risk on the horizon. The potential impact on oil prices and therefore on inflation is believed to be due.
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