See how savings, treasury and CDB yields look like with the rise in the Selic

As expected by the market, the Central Bank’s (Central Bank) Copom (Monetary Policy Committee) increased the basic interest rate, the Selic, by 1 percentage point this Wednesday (4th) to 12.75% per year. It is the highest rate since February 2017.

The movement further increases the attractiveness of fixed-income securities, especially floating-rate securities, which begin to offer higher yields with each rise in the Selic rate.

Although riskier assets such as stocks on the Stock Exchange tend to remain under intense volatility with higher interest rates not only in Brazil, but also in the United States, experts point out the importance of maintaining some portfolio diversification.

The continuous increase in interest rates is the BC’s strategy to fight an inflation that is hard to show signs of truce. The IPCA-15, prior to the country’s official inflation, rose 1.73% in April, the highest percentage for the month since 1995.

In the statement released with the decision, the monetary authority signaled the continuity of the cycle of high interest rates, but at a lower intensity. “For the next meeting, the Committee foresees as probable an extension of the cycle with an adjustment of lesser magnitude”, says the Copom.

Since the BC started the process of tightening monetary conditions, with the Selic leaving the historic low of 2% in March 2021 to the current 12.75%, the fixed income class has attracted increasing interest from investors looking for hefty gains and low risk.

A survey by investment search engine Yubb shows that, among the main investments in the fixed income class, incentivized debentures lead in terms of expected return with the new high in the Selic.

These bonds issued by companies in the infrastructure sector and exempt from IR (Income Tax) must deliver an average return accumulated in 12 months of 6.05%, already discounting the inflation of 7.89% estimated by the most recent Focus bulletin.

Letters of Real Estate Credit (LCI) and Agribusiness Letters (LCA), which also have tax exemption, must present an average return above 4% by the platform’s calculations.

Savings, on the other hand, which keeps gross income stable at 6.17% with the new high in interest rates, gives investors a negative real income of 1.59%, discounting inflation. The application also has no incidence of IR.

The rise in the Selic makes fixed-income bonds more attractive, while stocks and other riskier assets lose some of their appeal to investors, says Bernardo Pascowitch, founder of Yubb.

“In this challenging scenario, it is important that investors have a long-term horizon for their investments and seek diversification”, says Pascowitch, adding that fixed income bonds tend to present a more attractive return in the short term, while assets variable income, such as stocks and real estate funds, tend to pay investors in the long term.

Post-fixed on high

According to Marília Fontes, founding partner of the investment analysis company Nord Research, with the rise in the Selic rate this Wednesday, and with a new increase already expected for the June Copom meeting, floating rate bonds end up being the most benefited within of fixed income.

These papers, as the name implies, accompany the income paid by the Selic rate. Therefore, as the rate rises, floating bonds automatically also increase the return offered to investors, explains the partner at Nord Research.

“My biggest preference at the moment falls on the post-fixed ones, because, if we continue to be surprised with high inflation data, these bonds will yield more because the Selic will have to keep going up”, says Marília.

Among the main options for investors to expose themselves to floating-rate securities in the market, the specialist points out the Treasury Selic bonds, traded on the Tesouro Direto online platform, with daily liquidity and contributions from just over R$100.00.

DI-type investment funds from banks and managers and CDBs issued by large financial institutions that pay 100% of the CDI, or even a little more than that, are also mentioned among the options.

In the case of fixed-rate or inflation-linked bonds, which can also be accessed through Treasury Direct, the Nord partner recalls that the increase in interest rates by the BC causes a negative effect on the equity allocated to these papers known as mark-to-market.

When the investor buys one of these securities for a certain rate of return, and the interest charged by the market rises after the acquisition has been carried out, the security starts to record a negative variation in the portfolio.

“If the security is carried to maturity, however, the investor will have exactly the return that was agreed upon at the time of purchase of the asset”, explains Marília.

For this reason, the partner of the analysis house recommends that interested investors make investments in fixed-rate or inflation-indexed bonds for short-term only, with a maximum maturity of one year, to be carried to maturity.

In addition, shorter-term bonds suffer less from market volatility compared to longer-term bonds, says the expert.

portfolio diversification

Executive Superintendent of Investments at Santander, Luciane Effting endorses the assessment of the opportunities offered at this time by the growing yields of floating rate securities.

The bank projects a Selic rate of 13.25% at the end of the monetary tightening cycle, with inflation measured by the IPCA (Extended National Consumer Price Index) of 7.9% in the year.

“With interest and inflation projections at these levels, post-fixed investments tend to benefit”, says the superintendent.

She points out, however, that even in a scenario of increasing yields in low-risk fixed income, portfolio diversification should not be left out.

Faced with the countless uncertainties in the scenario, with the War in Ukraine and the high interest rates in the United States on the global scene, and the elections in Brazil, Luciane says that a recommendation she has passed on to clients is to reserve some space in their wallets for multimarket funds.

“These funds have as one of their main characteristics the agility of the managers to quickly change the positions carried in the portfolios with each change of scenery”, says the specialist.

Class managers are among those who have best been able to take advantage of the prospect of rising global interest rates, with positive consequences for shareholders.

The IHFA (Anbima’s Hedge Funds Index), a benchmark index for multimarkets, accumulated an appreciation of 7.2% in the year, up to the end of April, against 3.3% for the CDI in the same period.

Long-term vision for the Stock Exchange

Luciane also says that, in the case of the Stock Exchange, the tendency is for the shares in general to remain under intense volatility in the coming months, in an environment of high interest rates and electoral uncertainties.

But for the investor with a long-term view, this can be a good time to buy discounted shares of companies that will deliver robust results over a longer time horizon, assesses the expert.

In the bank’s recommended stock portfolio for the month of May, the financial sector, via Itaú and BTG Pactual, shares space with commodity producers such as Petrobras, Vale, Suzano and CPFL.

In 2022, up to May 4, the Ibovespa broad stock index recorded an appreciation of 3.3%.

“Our recommendation is that investors always have a diversified and balanced portfolio in relation to their profile”, says the superintendent.

According to Rafael Bevilacqua, CEO of Levante Ideias de Investimento, even more than the increase in interest rates, already widely expected by the market, what ended up weighing the most for the weak performance of local stocks recently was the return of mobility restrictions in China.

For him, investors’ concerns about the pace of the Asian giant’s recovery contributed to the Brazilian stock exchange recording in April the first monthly withdrawal by foreigners in the local market.

Bevilacqua believes that, as China begins to relax the restrictions imposed, the flow of international capital to the Brazilian market tends to gradually reestablish itself.

Commodities, banks and even companies in the retail sector seen as excessively discounted are among the opportunities that the specialist sees in the stock market for investors with a long-term view.

“I see a lot of discrepancy in shares linked to the consumer and retail sector, which, in some cases, are trading at levels even below the worst moment of the pandemic”, says Bevilacqua.