Itaú BBA - Taking profits in Brazil’s long-term real rates, as pension reform approval may be delayed – Fixed I

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Taking profits in Brazil’s long-term real rates, as pension reform approval may be delayed – Fixed I

February 6, 2019

We are tactically stepping out of our receiver position in Brazil’s NTN-B 2050 at 4.51% (reference price), taking profits after a 29bps gain

We are tactically stepping out of our receiver position in Brazil’s NTN-B 2050 at 4.51% (reference price), taking profits after a 29bps gain.

According to local news (Valor Pro), the government will probably send the official pension reform proposal as an entirely new constitutional amendment, instead of using the version currently in congress (PEC 287). If confirmed, the approval process will be delayed in at least 4 months, because the reform will have to pass through all the Lower House commissions again. The main trigger for further tightening of long-term real rates is the pension reform approval in the Lower House. Our receiver position assumed that we would likely see the approval in the Lower House in early 2019.

We will receive again if the news are not confirmed, and the government decides to use the current reform, speeding up the approval process.



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