Brazil Risk exceeds 300 points for the first time since May 2020

RIO DE JANEIRO, BRAZIL – The 5-year CDS (Credit Default Swap) – which measures Brazil’s risk – exceeded 300 points on Wednesday (June 29, 2022). The last time it was above this level was on May 25, 2020, when it reached 304 points.

The indicator measures the country’s confidence level and risk perception. The higher the score, the greater the risks.

The financial market evaluates a worsening in fiscal risks, especially with the Fuel PEC, which creates a state of emergency and releases R$38.8 billion (US$7.47 billion) for the federal government to pay outside the spending cap – the constitutional amendment that limits public spending.

The CDS had returned to the levels of the early months of the covid-19 pandemic when there was uncertainty regarding the impact of the health crisis on the economy.

Interest rate futures are also up. Contracts maturing in January 2023 trade at rates of 13.8%. For the same month of 2024, interest rates reach 13.65% (up 0.33%). For January 2026, they rise 0.39%, to 12.84%.

The worsening is also associated with the adverse international scenario. Countries are raising interest rates to control world inflation. The United States made the highest rate hike since 1994.

The environment creates a risk aversion scenario, which mainly impacts the emerging markets. Among them is Brazil.

With information from Poder360

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