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Financial News: BRAZIL: DI Rates Rise Amid Growing Concerns About

BRAZIL: DI Rates Rise Amid Growing Concerns About Reforms And Fiscal Balance

05/30/2018 - 19:14:00 (RTTNews)

(RTTNews) - The one-day interbank deposit futures rates (DI rates) in Brazil are rising near the end of the session, amid concerns about the fiscal trajectory of the country and low liquidity for investors looking to square their positions in long-term rates.

The chief economist of Spinelli Corretora, Andre Perfeito, said that the long end of the curve is reflecting uncertainty about the political and economic landscape in Brazil.

"Long-term interest rates are rising at the same time as the market notices that there is a threat to the reforms and also due to the perception that a center-left candidate might have more chances to be elected than a market-friendly one."

Near the middle of the session, the January 2019 DI contract rate was at 6.825%, from 6.775% yesterday, while the January 2020 DI rate rose to 7.84%, from 7.77%. The January 2021 DI contract rate was at 9.03%, from 8.95%.

"The long end of the curve is reflecting the real risk perception," the director of a foreign bank Treasury said that the long end of the curve is pricing the real risk in Brazil and that rates are "out of control" due to higher demand for risk premiums.

"I am still certain that rates have only one way to go, and that is up," he added.

A senior derivatives operator said that the Brazilian government needs to give foreign investors a "way out" of longer-term rates.

"The foreigners want to leave and find no liquidity," he said.

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