Fixed income maintains advantage with Selic at 13.75%, but analysts warn of fiscal uncertainty

Fixed income continues to be an attractive investment option with the Central Bank announcing this Wednesday (7th) the maintenance of the basic interest rate at 13.75% per annum, as shown by a survey by investment search engine Yubb.

The study indicates that the low-risk yield on the Treasury Selic public bond, which accompanies interest rate variation, is 4.72% per year, considering the real return discounted by the 5.92% inflation estimated by economists consulted by the BC in the Focus report.

“The moment, without a shadow of a doubt, is interesting for investors to increase positions in public or private fixed-income securities, but without necessarily taking everything out of variable income”, says Bernardo Pascowitch, founder of Yubb.

Having the attraction of offering exemption from Income Tax to investors, private bonds with tax exemption, such as LCAs (Agricultural Credit Letters), LCI (Real Estate Credit Letters) and incentivized debentures, also stand out in the survey, with estimated returns of 7.04%, 7.43% and 9.10%, respectively.

Bonds issued by companies, adds Pascowitch, require greater knowledge from interested parties regarding the credit risk related to the financial health of the issuer of the paper.

With a yield of 6.17% per year, savings accounts, the most popular investment among Brazilians, should deliver an inflation-discounted return of 0.24% in 2022, according to the survey’s calculations.

Although it has returned to delivering positive real profitability after completing two years in the negative field, financial planners point out that the return on the investment is less than half that delivered by the Selic.

Savings remuneration is 0.5% per month whenever the Selic rate is above 8.5% per year. When the basic rate is up to 8.5%, the savings yield is equivalent to 70% of the Selic rate.

Fiscal uncertainty can bring volatility to fixed income securities

Financial market specialists warn, however, that variations in investor returns may occur depending on the market’s reaction to messages from the Copom (Monetary Policy Committee) regarding the fiscal policy of the elected government Luiz Inácio Lula Silva (PT). Special attention must be paid to signs of inflation.

On the eve, the PEC of the Transition, approved by the CCJ (Constitution and Justice Commission) of the Senate, created an expense of R$ 168 billion in expenses above the spending ceiling. The increase in public spending tends to put pressure on inflation and, consequently, the expectation that interest rates will rise again in the future or, year at least, take a while to start falling.

Rachel de Sá, head of economics at Rico, points out that the maintenance of a set of rules to control fiscal expansion, that is, something that performs the function of a spending ceiling, will be essential so that “the path designed for monetary policy materialize”, he says.

While there are uncertainties about inflation, she recommends a conservative stance on investments and reinforces that variations can occur even with the maintenance of the Selic rate.

“Post-fixed bonds continue to be great alternatives, delivering good returns and with plenty of security and liquidity, when we are talking about, for example, the Selic Treasury, and other instruments, which yield at least 100% of the CDI”, he says.

“When we look at prefixed and hybrid bonds, which mix prefixed and are also linked to inflation, these tend to move more in the face of the Copom’s decision, even in a maintenance scenario. Future interest curves move more in a situation of uncertainty”, comments the economist at Rico.

She claims that the concern with fiscal policy may increase the return of fixed income securities issued after this Wednesday’s decision due to the expectation of an increase in interest rates in the short and medium term. On the other hand, securities issued beforehand and which, therefore, are in the hands of investors, may lose value due to mark-to-market, which is the price paid for securities sold before maturity.

“But it is worth remembering that the contracted yield will be guaranteed if the title is held until maturity”, reinforces Rachel de Sá.

“We recommend, for fixed-rate inflation bonds, a maturity in an average term, three years at the most, and well matched with the investor’s objective so that he holds it until the end and receives the contracted yield”, advises .

JGP Chief Economist Fernando Rocha states that, with the lack of definition about the course of fiscal policy, investment in fixed-rate securities ends up becoming riskier, since it is the most susceptible to the volatility of the future interest rate market.

Inflation-indexed securities, which also suffer from volatility, but to a lesser extent, and post-fixed securities that follow the Selic variation, tend to be the safest alternatives until there is a clearer definition of the fiscal framework, says Rock.

Beto Saadia, economist and partner at BRA BS, also highlights the need to consider uncertain scenarios for interest rates in the future, even in the face of maintaining the Selic at 13.75% per year.

“As much as the current Selic level is consensus, for 2023, the discrepancy of expectations for the future of monetary policy is impressive, with Selic expected between 8.5% and 14.5%”, he says.

“The dispersion is not the result of inflation, which already shows signs of deceleration, but of uncertainty regarding the trajectory of fiscal policy”, he adds.

Rocha, from JGP, states that the scenario of the BC resuming the process of raising interest rates cannot be ruled out. If inflation expectations for 2024 start to move upwards over the next few months, the Central Bank may be forced to promote new increases in the Selic rate, despite the high level it is already at, says the specialist.