Fixed income flight entered ‘last call’ – 11/12/2023 – Marcos de Vasconcellos

Delivering gains of 11% in the first ten months of this year may seem like a small step for a Petrobras stock, but it’s a big leap for a government bond. And the chances are high that we will be in the last calls for flights for this type of asset.

First, it is important to say that Petrobras shares (PETR4, which rose 52% this year) were only included in this text due to “poetic license”. I’m going to talk about fixed income, which, contrary to the name, varies a lot. Let’s compare bananas with bananas.

Expensive money in the market and the government’s appetite for taking more money out of circulation make fixed income assets rise. Selic, our basic interest rate, is the guide for this. The higher the basic interest rates, the greater the return offered by companies on our investments.

In addition to the “loans” directed to companies or sectors, which we make when investing in products such as CRIs, CRAs, CDBs or debentures, this scenario will define the return on public bonds, considered the safest assets in the country.

This year, inflation calmed down. The accumulated IPCA for the 12 months up to October was 4.82%. In the same month last year, the indicator increased by 6.47%. A considerable difference. With this, the government reduces the pressure to take money out of circulation — and the direct reflection of this are the Selic cuts.

That said, it is urgent to see that October was the third consecutive month with negative results in the IMA-B — a kind of Ibovespa for public bonds linked to inflation (called “Tesouro IPCA+”, or “NTN-Bs”).

The index is a reference for investors who know how to diversify their investments – and delivered gains of 11.2% this year.

What drove the index’s devaluation in the last three months were long-term bonds, with maturities over five years. But in October, even IMA-B 5, which only includes papers that mature before that, came out negative.

It is the first time since November 2022 that the index of short-term bonds linked to the IPCA is in the red. In the last three years (36 months), this has only happened five times.

It is not just inflation that has taken away the profitability of public bonds. Insecurity regarding fiscal balance (which I discussed in this column) and rising interest rates in the United States, a market considered safer than ours, lead large institutional investors to migrate their fixed income investments.

There are still good offers, but in less volume than six or eight months ago. The impression left for anyone looking at the market as a whole is that they will not be on the table for long.

With the drought, those who bought fixed income securities that offered good premiums will have increasing chances of selling them before maturity, at a profit, in the so-called “secondary market”, that is, to other investors. And thus use the variation in fixed income to your advantage.

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