Itaú BBA - Taking Profits on our Receiver in Brazil – Local Rates Trade Idea

Latam FI Strategy Monthly

< Back

Taking Profits on our Receiver in Brazil – Local Rates Trade Idea

November 7, 2018

We recommend taking profits on our receiver position in Brazil.

We recommend taking profits on our receiver position in Brazil.  On October 8th we recommended to receive outright the DI Jan 21 at 8.96% (link). Today we are taking profits on this trade with a 100bps gain. The rally of local rates was strong, and the market has eliminated the expectation of rate hikes in the very short term.

Real rates in the belly and the long-end remain at attractive levels, but approval of fiscal reforms are likely required for further tightening. Delivering the pension reform and keeping the spending ceiling would be consistent with lower interest rates in the long-term. However, we will wait for clearer signs on the reform agenda to enter in a more structural trade of declining neutral rates in Brazil.

 



< Back