Treasury Rates Hit Post-Election High Ahead of Central Bank Meeting

Brazilian government bond rates saw a sharp increase this Tuesday. This movement occurred upon the return from the All Souls' Day holiday and marks the start of the Monetary Policy Committee meeting. The 2037 Treasury bond with semiannual interest reached 15.50% per year. This level surpasses the record set immediately after the presidential election runoff.

Inflation-linked bonds also followed the upward trajectory. The 2032 IPCA+ Treasury bond returned to offering a yield exceeding 8% above price variations. Gains on inflation-linked securities ranged between 14 and 16 basis points, while fixed-rate bonds saw increases between 23 and 28 basis points. The market is showing caution regarding uncertainties about the economic policy direction for the upcoming term.

This tense environment is fueled by statements regarding a reduction in the Selic rate. Members of the transition team suggested a cut to 7.5% per year within a 12-month period. Economists warn about the risks of such a measure without proper support from inflation expectations and the trajectory of public accounts. The Ministry of Finance denied that there is any discussion about interest rate caps at this time.

The Focus Report raised the projection for the Selic rate at the end of 2026 to 13.50%. The estimate for the dollar exchange rate also rose to R$ 5.34. Investors are awaiting the Central Bank decision on maintaining the benchmark interest rate, currently at 13.75% per year. The result will be announced on Wednesday.