Bullish pressure is losing steam and exchange rates are on the sidelines with poor liquidity

Interest rate futures spent the day on the upswing, but the move lost steam in the final hour of trading and rates eventually closed sideways.

Interest rate futures spent the day on the upswing, but the move lost steam in the final hour of trading and rates eventually closed sideways. With local news relatively empty, the outlook served as a reference, curves opened and currencies came under pressure. But liquidity continued to be substandard as some players are already on year-end break.

Interbank deposit (DI) contract interest rate in 2024 Jan 2025 DI increased from 12.95% to 12.92% and Jan 2027 DI increased from 12.91% to 12.92%. By late afternoon, pressure on rates lost steam, apparently without a specific trigger. After the end of the session, the adviser of the future minister of finance, Fernando Haddad, informed that he asked the current government not to extend the fuel tax exemption, which ends this month.

Amid a warning that the low volume of contracts traded threatens a more reliable assessment of asset performance, fixed-income professionals saw a dominant bullish trend in rates this Tuesday, mostly linked to the international market. “We’ve had little news, but overseas Treasuries have come back from vacation with higher interest rates, which is helping to push interest rates up here. The external is what dominates, but there is also a bit of local context,” said Luciano Rostagno, chief strategist at Banco Mizuho, ​​referring to concerns about the fiscal scenario and monitoring the names that remain to be drawn up. government ministry.

As Broadcast Politico has revealed, Senator Simone Tebbet (MDB-MS) has accepted an invitation to take over the planning, which in theory would be well received. Outside of PT and with a liberal bias, the name pleases the market. But the reaction was neutral, because the portfolio will not control the Investment Partnership Program (PPI), which should remain with the Civil House, as well as the state-owned banks, which will be placed in the Treasury. “The impact will be limited,” says Rostagno, adding that the PT holds key positions in terms of political and social appeal. “This raises concerns about the quality of economic policy.”

Abroad, where liquidity was also at risk, Treasuries got a head start on bets on the Federal Reserve extending tight monetary policy. The ten-year T-Note traded at a fresh high of 3.86% in the afternoon. The blizzards that plagued several regions of the United States still do not cause pessimistic revisions for the economic indicators in the fourth quarter. As for the relaxation of the Covid-zero policy in China, the market is taking a short-term reading, looking at the expectation of a possible resumption of consumption with reopening measures. So far, the risk of thousands of deaths during 2023 has been relativized, which could have a negative economic impact.

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