Brazil's National Treasury repurchased R$ 27.5 billion in public bonds on Monday (16) to curb surging future interest rates, driven by the war in Iran and rising oil prices. The operation, the largest since 2020, precedes the Copom meeting on the Selic rate, currently at 15% per year. Expectations point to a smaller rate cut.
Brazil's National Treasury conducted bond repurchase auctions on Monday (16), acquiring R$ 12.1 billion in prefix bonds maturing between 2028 and 2032 and R$ 15.4 billion in IPCA+ inflation-linked titles, totaling R$ 27.5 billion net after issuing R$ 650 million in new inflation-linked papers. The intervention aimed to support the market following spikes in yield curves, linked to the war launched by the United States and Israel against Iran on February 28, which pushed Brent oil to US$ 100 per barrel and raised inflation projections to 4.1% for this year's IPCA, per the Central Bank's weekly survey released on the 16th. Market expectations for the Selic shifted from a cut to 14.5% to 14.75% at the Copom meeting on the 17th and 18th, with year-end projection rising to 12.25% from 12.13% previously. Treasury officials stated the action helped restore market functioning amid uncertainties. Economist Felipe Tavares of BGC Liquidez noted: “The main signal is that it is alert to what is happening in the market.” Post-operation, DI rates for January 2028 fell to 13.57%, the dollar closed at R$ 5.230 (-1.62%), and the Ibovespa rose 1.24% to 179,875 points. The Treasury canceled traditional auctions scheduled for Tuesday and Wednesday. Reports from banks like XP and BTG Pactual forecast Selic maintenance or a minimal 0.25 percentage point cut due to the oil shock.
