Which is better: CDI+1% or 110% of the CDI? Find out how to compare – 06/15/2023 – From Grain to Grain

Until recently, offers of CDBs referenced to the CDI were limited to those that promised remuneration proportional to the CDI, for example, 110% of the CDI. More recently, investors have been presented with the possibility of investing in CDBs that yield the CDI plus an interest rate.

This form of return was already common in corporate credit securities and resembles that of IPCA-referenced securities that investors are already used to, that is, IPCA+5.5% per year.

The difficulty for investors lies in choosing between proportional return (110% of the CDI) or increased return (CDI+1%).

Which do you think is the better of the two above?

The dilemma occurs because the CDI is currently at 13.65% per annum.

Thus, when we calculate 10% of this rate, we find the value of 1.356%. This result suggests that a CDB that yields 110% of the CDI should be better than one that adds only 1% to the CDI remuneration.

However, this is only true if the application is for up to one year. However, for longer-term applications, for example, for six years, this conclusion is not trivial.

For the analysis of bonds with longer maturities, it is necessary to consider the downward trend that the CDI should show over the next few years.

In this case, it is necessary for the investor to estimate a scenario for the evolution of the CDI in the coming years.

For example, assume that the average CDI for 2023, 2024, 2025, 2026, 2027, 2028 and 2029 is 13.1%, 10.5%, 8.5%, 8.0%, 7.5%, 7 .0% and 7.0%, respectively.

In this case, a CDB that yields 110% of the CDI should accumulate a return of 90.6% by 2029.

The CDB that yields CDI+1% should accumulate a return of 93.2% by 2029. Therefore, the equivalent of 116.2% of the CDI.

Thus, considering this scenario for the CDI, a CDB that yields CDI+1% is more advantageous than one that yields 110% of the CDI.

Even if from 2025 the CDI is stable at 8.5% per year until 2029, even so, the CDB that yields CDI+1% per year still beats another CDB at 110% of the CDI.

Therefore, when comparing bonds with long maturities, care must be taken when using only the current CDI rate for analysis. The analysis of all applications must be carried out for the entire investment period.

Michael Viriato is an investment advisor and founding partner of Investor House.

Talk directly to me via email.

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