Despite high interest rates, fiscal uncertainty keeps managers cautious

Despite the maintenance of the Selic rate at the high level of 13.75% per year at the most recent meeting of the BC (Central Bank) Copom (Monetary Policy Committee) and the high return on financial investments, managers have not shown much appetite for fixed income securities at this time.

Uncertainty about the conduct of fiscal policy by the Lula government from 2023 is the main point of attention, which makes market agents prefer to adopt a cautious posture, without making big bets at this time, even in the face of higher real interest rates. the average for most other countries.

Especially because, with investors’ expectations regarding a possible deterioration of the fiscal framework amid discussions on the PEC of the Transition of the elected government, the market is already betting on new interest rate hikes by the BC in 2023 in order to control inflation , which may further increase the level of profitability of the investments, but with a probable increase in market volatility as well.

Director of Fator Administração de Recursos, Marcello Negro says that, given the uncertainty that still hangs over the dynamics of inflation in the coming years, he has given preference to securities indexed to the IPCA (National Index of Prices to the Extended Consumer) with medium-term maturity, such as those maturing in 2026. These are papers that offered investors a real interest rate (discounting inflation) close to 6.15% per year on Friday (18) on the Treasury Direct platform, aimed at individual investors.

“Inflation is not under control. Quite the contrary.” He says that the recent IPCA deflation was motivated by specific aspects such as the reduction of ICMS and energy prices, but that these same factors may again put pressure on price indices from 2023 onwards.

Inflation itself on a global scale can also make it difficult for prices to fall more consistently in Brazil, says the director, who sees inflation-indexed bonds as a more defensive alternative to get through the challenging time, whether in the country or in the international market.

“We are not an island, we are not detached from the rest of the world, and we run the risk of imported inflation”, says the specialist.

Economic fundamentals indicate applying, but politics dictates waiting, says manager

CEO and director of investments at Persevera Asset Management, Guilherme Abbud says that, from a strictly economic point of view, there are good opportunities in the fixed income market.

According to Abbud, interest rates at the very high level they are already at, which should lead to a probable drop in inflation, and a relatively well-behaved exchange rate are among the main reasons that lead him to look favorably on the returns offered by prefixed loans.

On Friday, fixed-rate bonds maturing in 2025 offered a nominal interest rate of 13.7% per annum.

The Persevera director adds, however, that the lack of definition that remains regarding the government’s economic policy for next year counterbalances the positive fundamentals that he sees in the Brazilian economy.

Over the last few weeks, the manager has reduced the positions he carried in his portfolio in fixed-rate bonds, to wait for a definition of what the new government’s economic conduct will be from 2023 onwards.

“Economic fundamentals indicate applying, but politics dictates waiting and entering a little later.”

Environment is not conducive to taking risks, says manager

According to Fabiano Godoi, CEO and director of investments at the Kairós Capital manager, the fact that BC has done its homework before global peers, by starting the interest rate increase cycle first, does not guarantee a path forward without major upheavals.

In addition to the process of rising interest rates in developed countries, which historically are more adverse periods for emerging countries in general, doubts about the fiscal policy to be adopted from 2023 onwards and, consequently, about the inflationary dynamics are fundamental for it to be possible to have a more optimistic view on the performance of the markets, endorses the specialist.

“The environment is not conducive to taking risks.” He claims that the core inflation measures, which indicate the future behavior of prices, are still heavily pressured and above the ceiling of the Central Bank’s target.

In this scenario, despite the attractive level of interest rates, Godoi says he has preferred not to make any big bets on the local market, whether in fixed income, the stock exchange or the exchange rate.

“There are, yes, opportunities in fixed income, but I think it’s important to wait. A little patience is still needed. I’ve preferred to be less allocated until I have more conviction.”