Opinion – Grain in Grain: In the last 12 months, the less obvious choice of Tesouro Direto was the best

Imagine a scenario, in which inflation accumulated in 12 months is at 10% per year and with the prospect of remaining under pressure, and the CDI, in the same period, is at 3.25% per year. What would seem more sensible to do: invest in fixed income securities referenced to the CDI or in securities that guarantee a real interest rate of 4.7% per year, that is, above the IPCA?

This was the scenario that investors experienced in October last year, that is, 2021.

At that time, the market expected that the Selic Target, defined by the Monetary Policy Committee, would end 2022 at 8.5% per year. This perspective can be taken from the Central Bank’s October 2021 Focus report.

The obvious choice would be to invest in a short-term IPCA-referenced bond, for example, maturing in 2026. This bond promised a yield of IPCA + 4.7% per year at that time.

Simple reasoning would say that even if inflation dropped to 4% per year, the IPCA-linked security would give the same as the Selic-linked security, but with the benefit of having a protection in case inflation did not yield as expected.

After eight months, that is, at the end of May 2022, this investor was sure that his decision in October 2021 for the IPCA-referenced security was the correct one.

In May 2022, the IPCA was expected to end 2022 at 8.73% per year. Even if the Selic reached the expected level of 13.25% per year, at the end of 2022, the IPCA + 4.7% per year security would still have been a wise choice.

However, when we assess the current situation, the obvious decision to invest in the IPCA-referenced security was not the best.

The Selic rate rose more than expected, reaching 13.75% per year.

The IPCA has dropped sharply in recent months. In the last three months, we had the biggest deflation observed since the Real plan.

Finally, the IPCA 2026 Treasury bond rate rose, causing the bond’s devaluation.

Bonds referenced to CDI or Selic that did not seem the best choice in October 2021, presented the best performance in the 12-month period.

Looking back, the decision seems obvious as to which title everyone should have invested in.

As Delfim Neto said: when the future becomes the past, we all become smarter.

Now, everyone is facing another “obvious” decision. CDI or Selic seems to be the best choice for the next 12 months.

Remember, the obvious decision is not always the best one. We have to be careful not to be taken by the market at the moment we are experiencing. The ideal is to have diversification.

Comment here which one you think is the best decision now: CDI or IPCA+5.6% maturing in 2026?

Michael Viriato is an investment advisor and founding partner of Investor’s House

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