After Fed, Brazilian curve prices almost 100% chance of 25 basis point hike in Selic – Money Times


Federal Reserve


(Imagem: iStock/Douglas Rissing)

The rates of DIs (Interbank Deposits)especially those with longer terms, increased their losses on Wednesday afternoon, after the Federal Reserve announce a 50 basis point cut in feesand not 25 basis points as much of the market expected.

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Just like the yields of Treasuries, DI rates renewed the day's lows after the Fed announced an interest rate in the range of 4.75% to 5.00%.

In the very short term, the DI rate for October 2024 — one of the most liquid currently, reflecting bets for Copom this Wednesday — was still close to the previous adjustment.

The pricing embedded in the curve, however, has undergone changes. After the Fed, the Brazilian curve priced in a 99% probability of a 25 basis point hike in the Selic base rate this Wednesday and only a 1% chance of a 50 basis point increase. The previous day, the percentages were 91% and 9%, respectively.

In practice, investors have practically erased from the curve the bets that the Central Bank will raise the Selic, currently at 10.50% per year, by 50 basis points.

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