By lucascosta93
by Robin Brooks "The Achilles heel of any Fed tightening cycle is financial dominance. Real 10-year yield is up from -1.1% end-2021 to -0.7% now, i.e. still very negative (orange). But S&P 500 at one point yesterday was down over 10% year-to-date (white). Does the Fed have the stomach for this?" Related Datasets Financial - Global - Rates - Yield curves Financial - Global - Equity Indexes -...
by Lisa Abramowicz "Yields on 10-year Treasuries have climbed to the highest since January 2020." Related Datasets Financial - Global - Rates - Yield...
by Robert Jameson "Treasury Selloff Lifts Long-Dated Yields for Second Straight Day" Related Datasets Financial - Global - Rates - Yield...
by Bloomberg Economics "Mexico surprises economists with its biggest rate hike in nearly 5 years" Related Datasets Monetary - Mexico - Banxico - Money Market Interest Rate Inflation - Mexico - INEGI - Consumer Prices -...
IPCA-15 kept high in November, reaching 1.17 % in November (vs 1.2% in October). The index rose to 10.73 % (YoY), the highest since feb-2015. Known as the Inflation preview, IPCA-15 measures the same basket of IPCA, but from day 15 of the previous month to the day 15 of the current month. Even though the rise in prices were distributed among almost all itens, transport kept pressing the overall inflation, rising 2.89 %. Clothing, kept recovering its prices, as we near the end of the year festivities, shops will try to compensate their overall losses from the pandemic rising prices. The good news came from Food and Beverages, that albeit rising 0.4 % in November, decelerated from the previous months (1.38% and 1.27 % in September and October, respectively). Undervalued BRL, higher prices for oil crude and increasing fiscal risks will keep pressing the inflation in the short term. We are keeping our inflation estimation for 2021 at 10.1 %. For 2022, we believe inflation will not convert fully to the it's target (3.5 %), and it will end up at 5.3...
Central Bank Economic Activity Index contracted 0.35 % in September, the second contraction in a row, indicating that GDP in the third quarter of 2021 might had contracted 0.1 %. This month, services also contracted (-0.1 %), indicating that the only sector that was still recovering from the pandemic exhausted its force. With rising cost in the industry and agriculture and the end of the cyclical recuperation of services, Brazil recovery seems to have approached a halt. Moreover, global shortages in the supply chains, and, specially, the deceleration of the Chinese Economy, Brazil main trading partner, will constraint Brazil’s growth in the short term. As the economy enters contractionary grounds, Central Bank faces a dilemma. Inflation reached its 5-year maximums and the fiscal framework lost its main anchor, the expenditure ceiling rule, generating upside revisions on inflation expectations. The basic recipe indicates further rises on the basic interest rate. However, the economy is already entering contraction, and the rise of the SELIC rate will further damage economic activity. The velocity of the adjustment and the SELIC end-point rate is still a debate. As the fiscal risk increased, neutral interest rate might also had risen. For the moment, we believe Central...
The Monetary Policy Committee (COPOM) decided to rise basic interest rate in 1.5 bps, in line with market expectations, rising the SELIC to 7.75 %, above it’s pre-pandemic level (6 %). The Central Bank had promised only a 1 bp. rise in its last meeting at September 22nd, but the deterioration in the domestic and external outlook demanded a more “hawkish” action. At the external sector, the rising of inflation in several developed countries will demand action by the Central Banks, tightening the monetary liquidity, leading to a more challenging outlook for emerging economies.* Moreover, shortages in the supply chains around the world will damage growth in several economies this year.* Inflation persistence is also surprising in Brazil. The inflation rose to 10.25 % and indicates that it will continue to be pressed by oil and electricity prices and the recovery of services prices. We all know inflation will be well above Central Bank target in 2021 (3.75%) but expectations for 2022, currently at 4.4 %, are also above the 3.5 % target, indicating that a contractionary monetary policy is the correct measure to take inflation expectations back to its target. Recent news suggests that Brazil loosed the credibility of...
Brazil unemployment rate falled in August to 13.2 % (13 % if seasonally adjusted), the lowest since the coronavirus outbreak but far from its pre-pandemic level (11.2 %). All the sectors registered positive creation of employments, however, total employment reached 90 Millions, 5 % behind its pre-pandemic level (94 Million). The reopening of the Services sector alongside the high level of vaccinated population and the pandemic control are the main drivers behind the fall in the unemployment rate. However, we alert that the salaries kept depressed, thus, the reduction of government transfer alongside the rise of inflation will constrain the consumption recovery in the short term. While the economy continues to fully reopen there is still some margin for the unemployment rate to fall, however, we believe that full recovery from the pandemic will not be reached completely. As demand fell, many sectors will not be able to fully recover, therefore, unemployment rate should stabilize at a higher level. Moreover, Central Bank will tight the monetary cycle which soon will reflect in lower credit operations. We believe unemployment rate will finish 2021 at 12.5 %, and it will stabilize around 12 % during...
IPCA-15 kept high in October, reaching 1.2 % in October (vs 1.0% in September). The index rose to 10.3 % (YoY), the highest since feb-2015. Known as the Inflation preview, IPCA-15 measures the same basket of IPCA, but from day 15 of the previous month to the day 15 of the current month. Even though the rise in prices were distributed among almost all itens, the ones that pressed the inflation on the latest months kept rising, transport (2.06%), housing (1.87%) and food and beverages (1.38%). As services fully reopen, we believe it's depressed prices will keep rising in order of match up the rise of its costs, adding inertia to the rise of the prices. Undervalued BRL, higher prices for oil crude and increasing fiscal risks will keep pressing the inflation in the short term. We are updating our inflation estimation for 2021 to 10.3 %, from 9.5%. For 2022, we believe inflation will not convert fully to the it's target (3.25 %), and it will end up at 4.4 %. We believe that the Central Bank will need to speed up the pace of the adjustment of the basic interest rate, in order to keep expectations under control....
After holidays on October 11th and 12th, this short week for Brazil had data released on inflation, economic activity and services sector. Let's check it out all of this. Inflation rises to 10.9 % (YoY) in September Inflation in September accelerated to 1.2 % MoM (against 0.9% in August), again the main villain of this number were the electricity bills (6.4%), fuels(2%) and food (1.1%). Even though inflation were higher in those items, diffusion index was at 70 %, indicating a more generalised movement. As the economy opens at full, depressed prices for services will start to rise stronger and to add inertia to this movement. The hydric crisis, a devaluated BRL and the rise of the Brent will keep pressing the prices of electricity and fuel, keeping the inflation high during the last months of the year. We predict inflation closing 2021 at 9.0 %, way bigger than Central Bank target (3.5%). In order to keep expectations under control, there will be no easy medicine beyond tightening the monetary policy. We expect Central Bank to rise the SELIC rate in 1.25 % on its last meeting in December to 8.25 %. During 2022, there is no indication that Central...
Services sector kept its recovery in August, growing 0.5 %, albeit in a slower pace compared to July (+1.08 %). The strongest growth came from the Services provided to families (+4.13%), as vaccination accelerated and Covid-19 infections falls, families opted to increase the consumption of this type of services. Professional, Administrative and Complementary Services contracted in August, generated by a reduction on technical and profissional services (-4.6%), this might indicate that companies in general are requiring less professional services, a bad signal for the whole economy. Information and Communication Services (+1.23%), Transport (+1.06%) kept it's growth, as expected. Compared to it's pre-pandemic levels the services index is 4 % higher, however, not all the sectors of the index have completed the recovery from the pandemic. Transport and Information sectors, the biggest from the index, lead the services recoveries, with Transport 8.1 % higher than its pre-pandemic levels and Information and Communication Services 7 % higher. Falling behind are service in need of higher human contact, Services Provided to Families are 17 % below its pre-pandemic level and Professional and Administrative services are 5 % below. As the economy walks towards the "new-normal", human contact services might still warrants positives rates...
During September 7th, Brazil Independence Day, demonstrators showed up to support Bolsonaro Government. Their main claims were against Supreme Court, which according to their opinion is taking authoritarian acts, but others also claimed for “military intervention” and the return of the paper vote system. Almost all the capitals had demonstrations, but the biggest ones occurred in Brasilia and São Paulo, gathering 400 thousand people and 150 thousand, respectively. The demonstrations occurred in a delicate moment of Bolsonaro Government. Latest polls shows that his government approval went down to 25 %, the lowest during his whole term, moreover, former President Lula, the main rival of Bolsonaro for 2022 elections, leads votes intentions by a 14 % margin. The economy is not in good shape, Inflation rose to 9 % in July, with Food and Beverages registering a 13 % inflation, while unemployment rate stands at 14.1 %. Even though the support for Bolsonaro dropped among the population, the demonstrations showed that the Bolsonarism is pretty much alive as a movement. Bolsonaro’s speeches during the demonstrations rose the tone against Supreme Court Minister Alexandre de Moraes, stating that he would no longer comply with the Minister's decision. Minister de Moraes leads a...
Economy contracts 0.1 % in the second quarter of 2021 The IBGE revealed the GDP data for the second quarter of 2021. After a surprising rise of 1.2 % in the Q1 of 2021, the economy dropped marginally (-0.1%) during the Q2. The rise in the vaccinations and mobility data, alongside a recover in the services sector could not compensate the fall in the Agricultural and Industrial Sector. On the demand side, private consumption registered zero growth after the end of the fiscal stimulus generated by the “corona-voucher”. Investments registered a strong fall, contracting 3.2 % during this period due to a deterioration in the expectations and a strong rise in input costs. Exports have risen strongly, following the growth in the world trade. The higher government expenditures related to the acquisition of vaccines and medical equipment guaranteed a 0.7 % growth in the government consumption. @chart https://charts.alphacast.io/grapher/google-mobility-report-brazil?tab=chart&stackMode=absolute&year=latest&time=2020-02-17..2021-08-27 The agricultural and industrial sectors were impacted by the higher cost of energy (both fuel and electricity), while the lack of rain caused by the “La niña” phenomenon have disrupted the supply line of many agricultural goods. After registering a strong recovery in the first quarter both sectors dropped in the Q2-2021....
