BRAZIL: DI Rates Take Off From USD, Rising After Low Demand In Bond Auction

(RTTNews) - The one-day interbank deposit futures rates (DI rates) in Brazil are trading higher Tuesday, erasing the earlier downward path and taking-off from the locally traded U.S. dollar. A weak bond auction by the Brazilian Treasury hit the forward curve in another session marked by low liquidity.

A derivatives manager said that the futures rates market is "taking off from the movement of the FOREX" after losing support amid low demand in the repurchase auction and the sale of government bonds. For the director of the treasury of a foreign bank, the National Treasury has been "acting aggressively," even without signs of volatility and amid the lack of liquidity.

"This means that the Treasury is trying to defend a certain [FOREX] level, but in the end, there are the fundamentals that prevail," he said. "Without interventions in the foreign exchange, the U.S. dollar would be around R$ 3.95 to R$ 4.00, so the curve needs to open more," he noted.

Near the end of the session, the January 2019 DI contract rate was at 6.840%, from 6.785% in the previous settlement, while the January 2020 DI rate was at 8.31%, from 8.28%. The January 2021 DI contract rate was at 9.27%, from 9.25%.