BRAZIL: Long-term DI Rates Climb Back To Stability, Market Seeks Liquidity

(RTTNews) - The one-day interbank deposit futures rates (DI rates) in Brazil remain down for short and medium-term contracts, weighed by a stronger real, but cut bank on earlier losses at the long end of the curve, as investors try to push the Brazilian Treasury Department for extra liquidity.

Changes to DI rates, however, remain timid, as traders wait for the central bank to release the minutes of its most recent monetary policy meeting.

The January 2019 DI contract rate falls to 6.630%, from 6.685% last Friday, while the January 2020 DI rate decreases to 7.65%, from 7.76%. The January 2021 DI contract rate was at 8.81%, from 8.92%. The January 2023 rate, however, was at 10.14%, from 10.15%, while the January 2024 was at 10.44%, from 10.43%. The locally traded U.S. dollar fell 1.31%, to R$ 3.6900.

Fixed-income professionals said that the global relief after China made concessions to the United States during bilateral trade negotiations and a firm intervention from the Brazilian central bank in the foreign exchange markets led the DI rates to lose part of their risk premium.

"Still there is a bit of cautiousness before the Copom [meeting minutes]," said a derivatives manager.

A senior fixed-income trader said that the long end of the DI curve is also reflecting the market's intention to push the Brazilian Treasury Department to offer more liquidity in long-term debt.

"After testing the central bank, now the markets are testing the Treasury," he said.

Earlier, the Brazilian Finance Minister, Eduardo Guardia, told the foreign press that the Treasury and the central bank could move in tandem to avoid volatility in the local financial markets. A foreign bank treasury director told Agencia CMA that "investors [banks and foreigners] simply do not want to hold local debt securities carrying a one-digit yield."