U.S. Economic Data Triggers Brazilian Rate Decrease

On Friday, Brazil’s future interest rates dropped. This was after US Treasury yields fell.

Disappointing US industrial reports suggested the Federal Reserve might reduce rates soon, perhaps in June.

Brazil’s interfinancial deposit (DI) rates had already fallen significantly the day before.

This occurred right after the US Commerce Department shared the Personal Consumption Expenditures (PCE) index. It showed a +0.3% increase for January, as analysts had forecast.

Early Friday, Brazil’s future rates initially rose, mirroring a boost in ten-year Treasury bond yields.

By 11:46 AM, the January 2027 contract had reached 10.005%, up about 3 basis points from the previous adjustment.

The mood shifted when the US Manufacturing Purchasing Managers’ Index (PMI) came out at noon.

It went down from 49.1 in January to 47.8 in February. This was the 16th month it stayed below 50, signaling a contraction. Analysts had predicted a PMI of 49.5 for February.

This news lowered yields and weakened the dollar. In Brazil, DI rates fell after the US PMI release. This indicated a higher chance of the Fed cutting rates in June.

Simultaneously, the US reported a 0.2% decrease in January’s construction spending.

This was contrary to the expected 0.2% increase. Also, February’s US consumer confidence index was 76.9, under the 79.6 forecast.

José Faria Junior from Wagner Investments highlighted, “Three disappointing reports emerged today.” He noted falls in industrial output, construction spending, and consumer confidence.

He also said this week’s data were mostly below expectations, including unemployment claims, consumer confidence, and new home sales.

Following these reports, the Federal Reserve’s Atlanta GDPNow model revised its US GDP growth forecast for the first quarter down to 2.1% from 3.0%.

These events flattened yield curves in both the US and Brazil. By 12:50 PM, the January 2027 contract in Brazil had dropped to 9.930%.

Economic Indicators Amid Global Trends

Global developments overshadowed Brazil’s 2023 GDP growth news. The Brazilian Institute of Geography and Statistics (IBGE) reported 2.9% growth in 2023.

By the end of the day, the January 2025 DI rate was 9.945%, January 2026 was 9.73%, and January 2027 was 10.92%.

The market factored in an 84% chance of a 50 basis-point Selic rate cut in March. The Selic rate is 11.25%.

By 4:37 PM, the ten-year Treasury yield was 4.1817%, down 7.00 basis points. This shows how US data can impact global markets, including Brazil.

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