Treasury Direct: with interest at record levels, public bonds depreciate more than 12% in the year; understand

With attention focused on the electoral race, the Proposal for Amendment to the Constitution (PEC) of Auxílios, dubbed the “PEC of kindness”, rocked the fixed income market, by making public bond rates soar and reach historic levels.

The fiscal worsening predicted with the text that proposes spending beyond the ceiling estimated at more than R$ 41 billion weighed on interest curves and inflation-linked papers saw remuneration rise beyond 6%. The project creates social programs and expands existing benefits, and institutes a state of emergency until the end of the year.

In the case of the Treasury IPCA + 2045, for example, the real return offered early this Thursday morning (7) reached 6.03% per year, a record value for the paper, which began trading in February 2017. .

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Despite the interest offered having retreated a little during the afternoon, returns remain close to the record delivered by the security.

With the rise in rates, the price of securities naturally went through a devaluation and now accumulates a fall of more than 12% in the year, in the case of the IPCA+2045 Treasury. The data are from the Direct Treasury and go until this Thursday (7).

titlesDue dateLast 30 daysLast monthIn the year12 monthsPurchaseSale
Prefixed Treasure01/01/20230.880.854.934.2913.84
Prefixed Treasure01/07/20240.08-0.010.93-0.9613.35
Prefixed Treasure01/01/2025-0.14-0.150.03-2.0612.9313.05
Prefixed Treasure01/01/2026-0.72-0.67-2.37-4.9813
Prefixed Treasure01/01/2029-2.87-2.4913.0913.21
Prefixed Treasury with Semiannual Interest01/01/20230.880.855.044.6113.85
Prefixed Treasury with Semiannual Interest01/01/20250.160.130.8-0.9413.1
Prefixed Treasury with Semiannual Interest01/01/2027-0.71-0.73-2.3-4.7413.13
Prefixed Treasury with Semiannual Interest01/01/2029-1.66-1.47-4.92-8.1613.29
Prefixed Treasury with Semiannual Interest01/01/2031-2.28-1.58-6.6-9.7913.31
Prefixed Treasury with Semiannual Interest01/01/2033-2.45-1.8913.213.32
Selic Treasure01/03/20231.021.015.739.030.04
Selic Treasure01/09/20241.051.045.799.420.09
Selic Treasure01/03/20251.051.045.869.510.10.11
Selic Treasure01/03/20271.
Treasury IGPM+ with Semiannual Interest01/01/2031-1.83-0.175.432.786.07
IPCA+ Treasury08/15/2024-0.850.325.528.126.65
IPCA+ Treasury08/15/2026-0.890.134.576.45.865.98
IPCA+ Treasury05/15/2035-3.97-2.25-3.58-
IPCA+ Treasury05/15/2045-7.69-4.7-12.1-24.996.036.15
IPCA+ Treasury with Semiannual Interest08/15/2024-0.810.335.758.726.71
IPCA+ Treasury with Semiannual Interest08/15/2026-0.830.174.967.346.05
IPCA+ Treasury with Semiannual Interest08/15/2030-2.17-0.342.433.286.05
IPCA+ Treasury with Semiannual Interest08/15/2032-2.03-0.515.956.07
IPCA+ Treasury with Semiannual Interest05/15/2035-2.8-1.23-0.1-2.26.14
IPCA+ Treasury with Semiannual Interest08/15/2040-3.72-2.03-0.86-
IPCA+ Treasury with Semiannual Interest05/15/2045-4.25-2.45-1.63-6.886.24
IPCA+ Treasury with Semiannual Interest08/15/2050-4.4-2.58-2.68-8.776.26
IPCA+ Treasury with Semiannual Interest05/15/2055-4.78-2.85-3.78-

Source: Direct Treasury. Considers the position on 07/07/2022. Some papers began to be traded during the semester and, therefore, do not have a history of 6 or 12 months.

This morning, the purchase price of this security, for example, was R$ 1,052.43, against R$ 1,150.16 registered in the first session of this year.

The phenomenon in which the rise in rates results in a fall in prices – and, therefore, the devaluation of securities – is related to the so-called mark-to-market.

The interest offered by a fixed income security has an inverse relationship with its trading value by investors. When rates rise, as was the case now, their price tends to fall. The opposite is also true.

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Other inflation-linked securities also suffered from mark-to-market. As an example, there is the Treasury IPCA + 2055, which accumulates a fall in the price of paper of almost 4% in the year. In the last 30 days alone, the retreat has reached almost 5%.

At the opening of business this Thursday (7), the real interest offered by the Treasury IPCA + 2055 reached 6.14%, a historic percentage for this security that became available from February 2020.

A record was also recorded among some fixed rate securities that saw interest rise to up to 13.20% per year, in the first update this Thursday (7), such as the Fixed Rate 2033 Treasury. of 2%.

Although the investor has the impression that he is losing money because the price of the paper has decreased, there will only be a real loss if he chooses to sell the security in advance. In other words: sell it before the stipulated maturity on the day the paper was acquired.

Low allocation in prefixes

Although interest rates have retreated a little throughout the afternoon of this Thursday, the expectation is that the scenario will remain volatile and that rates will remain high in the short and medium terms. In other words, the tendency is for the price of public bonds to continue to decline.

In a report, Camilla Dolle, head of fixed income at XP, and Pietro Consolaro, fixed income analyst at the house, highlighted that the inflationary environment should remain challenging, although the rise in prices could have a negative shock in the short term with measures from the Fuels PEC.

Read more:
• Treasury Direct: longer-term prefixed interest rates reach 13.20% and reach a new historic mark

The text approved weeks ago by Congress defined that fuels — as well as energy, public transport, natural gas and communications — are essential and indispensable goods. As a result, state governments cannot charge ICMS on these items above the ceiling established by the text, of 17%, or 18%, in addition to other taxes.

Even with the approval of this project, the XP specialist believes that inflation should remain above the Central Bank’s target in the next two years, in the face of domestic and external uncertainties. The house’s expectation is that the Broad National Consumer Price Index (IPCA) closes the year at 7%. For 2023, projections indicate that official inflation should end at 5%.

According to XP projections, the Selic rate should end this year at 13.75% per year and end 2023 at 8.75% per year. In this sense, he says, the allocation in fixed-rate should remain low, for now, even if the rates of some assets are at their maximum.

The reason is that with the expectation of a rise in the Selic, the tendency is for the interest offered by fixed-rate securities to be outdated, because the investor “locks in” the rate when purchasing the paper.

On the other hand, bonds linked to inflation (Treasury IPCA+) and floating-rate bonds linked to Selic (Treasury Selic) should continue to be preferred. In a document sent to clients, Rico Investimentos analyst Paula Zogbi states that IPCA-indexed papers can be good assets to protect assets and purchasing power, as part of the return accompanies inflation.

Selic-linked papers, on the other hand, can benefit from higher interest rates and increase the profitability of their emergency reserve, or cash, which is the money that investors must invest in applications that allow quick redemptions, if there is any unforeseen event.

About Yadunandan Singh

Born in 1992, Yadunandan approaches the world of video games thanks to two sacred monsters like Diablo and above all Sonic, strictly in the Sega Saturn version. Ranging between consoles and PCs, he is particularly fond of platform titles and RPGs, not disdaining all other genres and moving in the constant search for the perfect balance between narration and interactivity.

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