Government bonds fall by up to 7.3% in March and real interest rates return to 2019 levels; is it worth taking advantage and investing?

Government bonds fall by up to 7.3% in March and real interest rates return to 2019 levels; is it worth taking advantage and investing?
Government bonds fall by up to 7.3% in March and real interest rates return to 2019 levels; is it worth taking advantage and investing?

(This article had data on monthly changes in government bonds changed at 12:25 pm on April 1, 2021. In the original version, they covered the period of the last 30 days.)

SÃO PAULO – The “dance of the chairs” in the government, the intensification of fiscal risk in the face of the impasse in the 2021 Budget and the still unpredictable scenario of the pandemic in Brazil, with the determination of new measures of social isolation to contain the pace of contagion and the number of deaths, has led to an increase in the premiums offered by public securities traded in the Treasury Direct.

In the case of inflation-linked papers, for example, rates returned to levels of almost a year ago, with premiums above 4% per year in most papers, as in the case of Treasury IPCA + with semiannual interest 2055. The security paid real interest of 4.62% on March 25, the highest level since May 14, 2020 (4.67%).

In fixed-rate securities, where the investor knows exactly how much he will receive at maturity, the rates are the highest since 2019, with premiums of around 9% per year.

As a result, all papers – with the exception of those indexed to the Selic rate – currently available for purchase via Tesouro Direto, the federal government’s purchase and sale program for individuals, returned to fall in prices in March. In February, casualties had already approached 4%.

The biggest drop of last month came from the Treasury IPCA + maturing in 2045, with a devaluation of 7.3%, bringing the real premium paid for the paper to 4.06% per year.

Among the fixed rate loans, the negative highlight was the Fixed Rate Treasury with semiannual interest and a term in 2031, which fell 4.78% in March, with an annual premium offered of 9.3%.

Exception for the period, the Treasury Selic papers, which follow the Selic variation and are less exposed to market volatility, registered gains of 0.13% in March, in the 2024 term, and 0.27%, maturing in 2027 .

In the accumulated in 12 months, all the papers available for purchase still accumulate high, with emphasis on the title Treasury IPCA + 2045, with an appreciation of 20.8%.

In view of the assessment of risk and return asymmetry in the rates currently paid and with consecutive upward revisions in the prospects for rising inflation, wealth managers and investment specialists have increased their exposure to public securities indexed to the IPCA.

The assessment is that the premiums on these papers are at attractive levels and offer an excellent investment opportunity for investors with a medium and long term profile.

See below how public securities available for new investments behaved in March, year to date and in 12 months, when data are available.

It is important to remember that the investor will only have the losses or gains pointed out if he effectively sells the papers in advance. If you load them to maturity, the return will respect the rates and conditions contracted at the time of purchase of the securities.

The best “horse” to be positioned

For Renan Rego, a partner at the asset management company G5 Partners, government bonds linked to inflation offer a better opportunity for real gain than private credit papers.

He assesses that rates above 4% are not sustainable in the long run when compared to those of countries in situations considered worse than Brazil, such as Argentina – which opens up an opportunity for purchase.

Regarding the entry point, Rego points out that there are factors that can lead to new rate openings, such as the forwarding of reforms, exchange of ministers, interest rate hike by the Central Bank, and that, for this reason, has not increased the position of once, with new purchases as market stress increases.

In December, the manager had reduced the positions in government bonds linked to the IPCA because it understood that the premiums to be raised were lower. The exposure approached 10% to 12% in the clients’ portfolio and today it is already closer to 22%, focusing on intermediate maturity papers, between 2028 and 2030. “It is the best horse to be positioned today”, defends the partner.

As in the G5, XP Advisory has increased its share in inflation-linked securities given the interesting view of the relationship between risk and return. The percentage allocated to IPCA + Treasury papers, which was close to 10% at the beginning of the year in the portfolio of moderate profile customers, is now between 15% and 20%.

The positioning, according to Guilherme Anversa, partner and manager of XP Advisory, is due to the advantage of these securities, which protect the purchasing power of investors. “Inflation can accommodate this level and NTN-Bs [Tesouro IPCA+] will help with a possible rate close, which is not the baseline scenario. And with higher inflation, these assets work as protection ”, he highlights.

According to the most recent Central Bank Focus report, the expectation is for an increase of 4.81% in the Extended National Consumer Price Index (IPCA) this year, above the 3.75% target, with an interval of tolerance of 1.5 percentage points up or down.

According to Anversa, the moment is interesting for investors with a focus on the long term who want to have real gains, with a preference for bonds with maturities up to 2035 and with the objective of loading the paper until maturity.

The manager prefers to avoid papers maturing after this period, given the risk of further fluctuations and the greater sensitivity to the Brazilian fiscal issue, with the market waiting for clearer signals after the ministerial reform, in addition to expectations regarding the advance in the agenda. reforms.

In the portfolios managed by the Guelt Investimentos office, the slice allocated to securities indexed to the IPCA has also stood out.

For investors with a conservative profile, the preference falls on the IPCA + Treasury with maturities between 2026 and 2028. As for moderate profiles, the middle of the interest curve, between 2035 and 2040, may be a good option, says Flavio Byron, partner at Guelt .

“If the investor is only in Selic-indexed or fixed-rate securities, he will lose purchasing power if central banks around the world decide to keep interest rates low and show themselves more tolerant of inflation – which is the current scenario,” he argues.

For the investor who accepts more risk and wants to capture good opportunities, says Byron, he can opt for the longer maturities, such as 2045 and 2055, which pay real interest in the range of 4% to 4.4% per year, allowing for protection of the investor’s purchasing power in the long run.

Prefixed: better to wait

With a still very uncertain scenario in the country, with possible fiscal worsening and high inflation, the consulted managers have preferred to observe the behavior of fixed-rate securities from afar, without setting up a position.

Byron, from Guelt, says that the high rates of these papers, around 9%, give the feeling that there are gains, especially when the current level of 2.75% of the Selic rate is analyzed.

“At first, the asset looks attractive, but we have to remember that we live in Brazil and that the scenario changes overnight. So getting tied to a fixed rate today may not be the best in the near future. Inflation may be high and real interest rates, much lower than if the investor had a role indexed to the IPCA ”, he says.

In the opinion of Anversa, from XP, the current awards are starting to get interesting, but for now, he prefers to wait to invest.

According to the manager, while there is no clear disclosure of how the domestic budget will be resolved, it is better to stay out of these assets, concentrating the allocations on IPCA + Treasury bonds, which offer the benefit of protection against inflation.

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