Giulianno Perri

It's a pleasure to share our recent article titled 'Stock splits and reverse splits in the Brazilian capital market,' which has been published in the 'Journal of Economics, Finance and Administrative Science' (IF 2.4). Special thanks to my co-authors from the University of São Paulo (USP), Mr. Daniel Werner Lima Souza de Almeida, Prof. Tabajara Pimenta Junior, and Prof. Fabiano Guasti Lima. #Finance #FinancialMarkets #StockSplits #StockMarkets https://lnkd.in/dR_KygFw

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🚀 Record Growth in Brazil’s Debt Capital Market in April! 🎋 Brazilian Debt Capital Markets sustained their secular growth in April, with total issuances reaching BRL 187 billion ($37B) in the first four months, representing a 139.1% increase compared to the same period last year. 📊 April highlights include: Interest Rates: In Brazil, there was a slight decrease in short-term maturities and a widening of long-term ones, affected by economic uncertainties and a more cautious view on government spending policies. In the US, the Fed indicated that interest rates will remain high for a longer period, which, combined with below-expected economic data, raised inflation concerns. Private Credit Markets: There was a slowdown in the offerings of #CRIs, #CRAs, and #debentures, with a 39% decrease in April compared to March, totaling BRL 33.8 billion ($7B). Factors such as problems in the agricultural sector and uncertainty regarding future Selic rate cuts contributed to this reduction and the increase in private credit spreads. Debentures, Commercial Notes (NC), and Real Estate #ABS (CRIs): Despite the slowdown compared to March, debentures and NCs continued to dominate issuances with a record BRL 115 billion ($23B) in the first four months compared to the same period in 2023. CRIs also showed strong growth, with an increase of 194%, totaling BRL 21.8 billion ($4B). Agricultural ABS (CRAs): These also performed impressively, totaling BRL 13.5 billion ($3B), an increase of 122% in the same period. 🔍 Market Radar: Impact of Spending Policies: Government reactions regarding spending policies are increasing uncertainties, which could influence the term structure of interest rates and investment decisions. Agribusiness: The first quarter was challenging for #agriculture. Requests for debt extensions, bankruptcy filings, and missed expectations made the cost of capital higher and more restrictive. Another point to watch is the impact of heavy rains in Rio Grande do Sul. Want to better understand how these trends can affect your investments or your business? Check out our attached monthly newsletter for detailed analyses and deep market insights. 💡 Exploring debt financing as an alternative to equity? Contact Raquel Silberberg Kryss, Bruno Valsecchi, Igor Donni, Felipe Moraes, Arthur O'Keefe, and discover how Bamboo Debt Capital Markets Platform, Brazil’s Premier Tech-driven DCM Dealer, can boost your company’s growth with our innovative debt solutions. Pioneering Access to Debt Capital Markets, together we can navigate the complexities of today’s market and unlock new opportunities for sustainable growth. 🎋 We look forward to exploring these opportunities with you! 🚀🎋 Article credit: Natan Oliveira Santos - Thank you! 🙏 #DebtCapitalMarkets #Debentures #Investment #BambooDCM #ABS #StructuredCredit

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Brazil Local Fixed Income closing commentary Long live the Jay Powell rally. The rally which started with the FED chairman FOMC dovish press conference consolidated with today’s softer employment numbers. I am starting to wonder if Jay Powell has psychic powers when it comes to non-farm payroll numbers. Last time when he changed his tone to more hawkish, we were followed by a release of a very strong non-farm payroll number and now when he changed back to a more dovish tone we were followed by a softer figure. I should have come to this idea before today’s number, so now I wouldn’t so frustrated as I am now. The rally continued in markets across the Globe with now the US pricing 45 bps of cut in 2024. Here it was now different. We had BRL appreciating close to 1% and reaching close to 5.05 levels. The local curve once more bull flattened with the belly tightening 5-10bps and the long end up to 15bps. The short end of the curve is somehow stuck with this rally. The Central Bank has set the bar quite high to change the perception of the outcome of the Copom decision of next Wednesday. Yesterday it was pricing 25 bps of cut and now it is more like 31 bps of cut. Quite a shy move you may think, but as I said, the bar is quite high and for the 50 bps cut outcome to be really on the table we would have to have the BRL at least at 5.00 level or even lower. In this context what players have been doing is taking out the hike premium on the local curve that was embedded during the last global selloff and here is why the curve has been flattening the last couple of sessions. We had a sharp correction of the nominal curve as mentioned before, but the real rates are still totally lagged. I understand that we have the issuances by corporates and the National Treasury has increased the amount issued in these bonds, but even though, levels seemed to be totally outrageous, especially the long end. We continue to see PA accounts filling it up at current levels, which makes a lot of sense, as it is totally unsustainable real rates of 6.20/6.15 for 2050. Think about it. Have a good weekend, Ed Disclaimer: “This material was prepared by Local Fixed Income trading desk of Itaú Unibanco, based on reliable public sources, not reflecting the opinion of Itaú Unibanco and the area responsible for its creation and it should not be considered as an analysis or consulting material of investments”.

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Brazil: The sum of all fears As expected, with the government not delivering, and everything we have been saying, now we have the locals trying to call the BCB to insert USD by pushing the BRLUSD up so they can be sold and put a lot on the poket as well. So the repricing will be later…. For now it’s local expertise. One may fall on the funny move but those who have trading this for a long time already felt the smell and are in …. A very respect PM in Brasil who I know Mr. Menezes and Fabiola Vargas now trading on Mr Menezes family office had already said it before it happened “why didn’t the BCB did not insert the total size of the local bond instead a small piece of it ? This will bring more volatility….” Well they don’t have a crystal ball, but know very well the locals and their mechanics of the fx regarding BRLUSD and local fixed income . For now taking a jump over when and if Israel will escalate the conflict or not, we are back into the base case scenario “walking on thin ice” or for Americans, mkts may remain irrational more than you can stay solvent… And so here we are again. Talking about repricing doesn’t make much sense once what matters is value and price is what you pay, long history short “Price is what you pay and value is what you get”. For now we have no trustable data from Brazil to make this calculus and moreover Economics are missing targets from along time now, what is really not their fault for what’s worth… Having that said if you are small, have not a great track record on Bz local mkts I humbly suggest you do not take this BRLUSD with a not worth risk return at all. And if you are making money remember , one don’t have to hit the eye, but just killing the target is already good enough Global economy is hot Mr. Campos is way aware of if, and for that I feel less bad. So, within this “locals game”, better save than sorry. Receiving in BRL or USD or MXN or gold and metals is way more prudent and efficient. Finance 101 May we all have a pleasant session ! VP

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Brazil Equity Strategy: “Wake Me Up When September Ends” - A Look at US & Brazil Rates Versus Equity Trends* https://lnkd.in/dcaAMS_a Key message. Fed rate cuts implied by the market suggests that June is no longer a consensus (market prices suggest it to happen in July/September meetings, or December as per our current Macro team base case), delaying the expected reallocation to equities. Brazil is up 6.8% since treasury peak (Oct 19, 2023). We analyze recent trends in US & Brazil Rates Versus Brazil Equities and reach 4 takeaways: 1) Brazil is a Highly Inverse Correlated Market with Interest Rates, 2) the Country Stands Out on Earnings Yield Gap Compared to Historical levels* (+1.0% versus -0.9%, yet far from 4% peak), at close to last decade peak in earnings yield gap versus US (3.8% versus -0.6% historical or the 4.5% 2std) and an earnings yield gap (vs. BZ real rates) of 6.6% vs. 4.6% hist. avg.; 3) Sector & Factor Investing: U.S./Global Momentum Leading the Way since October 19, 2023 U.S. Treasury peak, While LatAm/Brazil Value and Quality Suffered; 4) Our macro team recently updated scenario (see reports on Brazil and Global) suggests a balanced portfolio with value and quality:* a) higher FX of R$5.20 for 2025E bodes well for FX Hedge/Commodities with Attractive Valuation (Pulp & Paper and Oil & Gas); b) higher 2024 GDP of 2.3% based on consumer suggest domestic quality (ROEs above 15%: transportation, banks and consumer), higher Selic of 9.75% (bond proxy with double-digit IRR (utilities, malls and ports). Avoid leverage and additional material negative earnings revision trends.

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Brazil: IPCA inflation rate accelerates to 3.93% y/y in May, after a sequence of 07 months of deceleration IPCA inflation rate accelerates to 3.93% y/y in 12-month terms in May from 3.69% the month earlier, after a sequence of 07 months of deceleration, according to data released Tuesday by the stats office IBGE. In addition, IPCA inflation rate increased 0.46% m/m, up from a 0.38% gain in April. Part of the monthly acceleration is attributed to a weaker comparison base from the same period in the previous year, as inflation rate had accelerated 0.23% in May 2023. In m/m terms, eight out of the nine groups surveyed presented gains in the basket of products and services. Notably, the groups of health and personal care, housing, and food & beverages. Alongside the transportation group, these groups were the main contributors to the overall increase of the inflation headline. Together, they accounted for 89% of the inflation index variation. Health and personal care accelerated 0.69% m/m in May, after an increase of 1.16% seen in the month earlier. This group exerted an impact of 0.09pp (down by 0.06pp m/m). This upward movement reflected a 0.77% adjustment in health insurance plans and a 1.04% increase in personal hygiene items. Overall, the IPCA inflation rate of May represents a negative surprise quantitatively and qualitatively. A yellow alert is raised for a potential inflationary reacceleration, initially towards the 4% mark over the 12-month period, with the possibility of further short-term increases. This outcome suggests a need for a conservative and cautious decision by the monetary authority. De-anchoring of inflation expectations, coupled with the uncertain fiscal scenario, is expected to continue pressuring the local exchange rate and market volatility, exacerbated by communication issues from the Finance Minister and the economic team. All these factors implies there may not be room for a further 25bps cut at the upcoming Copom meeting, as they indicate an upward inflationary pressures for 2024 and 2025, assuming that the economy operates near its potential GDP. Analysts will closely monitor the Copom reaction to the higher-than-expected IPCA inflation rate in the upcoming meeting, in which a pause in monetary easing is beginning to appear plausible. Produced by Macro+Markets

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Brazil Local Fixed Income closing commentary We lack some logic these past couple of days in the local rates market. Yesterday with widening US rates as another result of stronger economic data, we had tightening local rates. Today the opposite happened with softer inflation expectations at the University of Michigan we had a tightening in US rates and widening in local rates. Today’s widening in local rates was easily predicted, as every Friday afternoon in the recent past, players tend to protect their books (or for those paid put some pressure on it) ahead of the Focus survey release on Monday. Speaking of it, there has been quite a discussion of the effectiveness of using inflation projections in the Focus survey to conduct monetary policy. The discussion lies in the fact that are some players (mostly local HFs) that tend to talk their books when filling the survey. Not while ago, we saw the average of inflation expectations moving upward because of someone (or more than one) putting 8% inflation. I don’t know anyone that expects inflation to be 8% in the foreseeable future, but even though, they filled the survey with it. The assumption here is that this economist that filled this bizarre answer was just wishing that the expectation would move upward and probably they would make a few bucks with their possible paid position. A possible solution for such a problem would be nominal answers, because right now, it is totally anonymous. Perhaps if we knew who expects an 8% inflation, he might be a little embarrassed for such a prediction. That’s an idea. Back to today’s price action, I think we could be having the same thing. Players with paid positions, paying today and increasing the fear of upward revisions of inflation expectations on next Monday. I am keeping my Jan/26 receivers as I still believe levels are quite stretched. The curve is pricing 3bps of cut in the next meeting (which means no cut at all) and there is a good premium embedded in the curve, or anyone is expecting hikes right now? Have a good weekend, Ed Disclaimer: “This material was prepared by Local Fixed Income trading desk of Itaú Unibanco, based on reliable public sources, not reflecting the opinion of Itaú Unibanco and the area responsible for its creation and it should not be considered as an analysis or consulting material of investments”.

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Brazil Local Fixed Income closing commentary We started the session in a promising tone, local rates were mildly tightening, and it felt that it could be a good session. Once more we were run over by strong US economic data, this time stronger than expected PMIs, that triggered a massive widening in US rates and across the Globe. Along this bad external mood, we had the weekly LTN+NTN-F auction, which was big in the sense of the recent fragile mood of the market, but it went through smoothly. All in all, the price action of local rates was quite decent with the local curve having a bull flattening move with the belly tightening 1-3bps and the long end as much as 13bps. I understand that yesterday local rates underperformed every asset in the World and today it was somehow a payback. As I wrote yesterday, I believe levels are quite stretched with the curve pricing some hikes along the way. I don’t believe hikes are on the table right now and this is just risk premium embedded alongside the curve. We need some sort of break from the exuberance of the US economy in terms of economic releases and then local rates will rally. Good evening, Ed Disclaimer: “This material was prepared by Local Fixed Income trading desk of Itaú Unibanco, based on reliable public sources, not reflecting the opinion of Itaú Unibanco and the area responsible for its creation and it should not be considered as an analysis or consulting material of investments”.

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Brazil Local Fixed Income closing commentary Today it was supposed to be a massive rally in local assets, like what it happened with the rest of the World. The trigger for the rally was the softer US retail sales number that ignited a massive tightening of the US rates and open the path for all the assets to thrive. Along the day we also had a very good twenty-years US treasuries auction that boosted the tightening of US rates and all the other assets. Now you might be asking why Brazilian assets underperformed by that much? Well, the only explanation is our idiocrasy that played a major role in today’s price action and today’s idiocrasy was the President interview to CBN radio, where he had a warlike tone, much alike when he was campaigning. Criticism toward the Central Bank Governor and the level of the base rate were abundant and nothing concrete regarding cutting expenditures. The market understood that we are still miles away from any concrete measure to address our fiscal issue and today’s price action was a response to it. I believe local rates were supposed to have an even worse session, but it was contained by foreign clients stepping in and buying local bonds once more. Now the market is anxiously waiting for the Copom decision tomorrow, hoping for the board to unanimously decide to stay put. Anything different, it will not be well accepted by the market. It will be a long wait. Good evening, Ed Disclaimer: “This material was prepared by Local Fixed Income trading desk of Itaú Unibanco, based on reliable public sources, not reflecting the opinion of Itaú Unibanco and the area responsible for its creation and it should not be considered as an analysis or consulting material of investments”.

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Brazil Local Fixed Income closing commentary The IPCA from April was released early in the morning and it came pretty much in line with our macro research team expectations and the market’s consensus. At first local rates reacted positively to it with yields tightening across the curve. The villain today was the external scenario with US rates constantly under pressure. This pressure was fueled by the higher inflation expectations of the University of Michigan survey and also some hawkish comments by some FED members. We also had foreign clients as better sellers of local bonds, especially NTN-Fs , which also add it up to the pressure of today’s price action. The result of all of it was local yields widening 5-7bps across the curve. There is an expectation that the Central Bank weekly Focus survey on next Monday will bring more deterioration to inflation expectations due to the split Copom decision. Not quite sure if the market will promptly react to it as I believe they will rather wait for the last meeting minutes for a better understanding of the rationale of such a decision. I keep with my Jan/26 receiver and will patiently wait for the minutes before taking any action. Have a good weekend, Ed Disclaimer: “This material was prepared by Local Fixed Income trading desk of Itaú Unibanco, based on reliable public sources, not reflecting the opinion of Itaú Unibanco and the area responsible for its creation and it should not be considered as an analysis or consulting material of investments”.

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"Special attention for the floods in the South of Brazil. Rio Grande do Sul state has been experiencing very severe floods since the weekend. The soybean harvest is 70-75%, and down south it's close to 60%, the most affected region." A few million tons could be compromised by the extreme rains and floods in Rio Grande do Sul, some areas saw 683mm of accumulated rains in 72hs, this will most probably reduce the balance of soybeans to be exported from the State. Bullish soybeans but not so bullish soymeal as this will probably reduce the exportable surplus but not local crush. Something to monitor closely.

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Brazil Local Fixed Income closing commentary Late last night we were surprised by the change in the command of Petrobras, so I was expecting some pressure in the opening today, which was a correct assumption. The opening was under pressure, but soon enough we had a soft CPI release in the US, which triggered a very good mood abroad and part of the pressure was dissipated. Along the day we had Governor and the director of monetary policy of the Central Bank speaking in events and both had the same hawkish tone in their speeches in a clear way to show the unity is back in the committee. Also, along the day we had foreign clients jumping in and buying NTN-Fs, probably on the back of a better external mood. These inflows alongside the talks of the monetary policy authorities were the fuel for the local rates curve flattening move, with the short end widening 2-3bps and the long end tightening as much as 7bps. It is important to note that compared to our peers, local assets (all of them rates, fx and equities) underperformed quite a bit and this has to do with the Petrobras story. Tomorrow we will have the weekly LTN+NTN-F auction and I would expect that the National Treasury will do an average size issuance, with some increase in the NTN-Fs to supply what was bought by foreigners. I took profits of my long BRL and still holding the Jan/26 receivers. I was looking to extend duration but was run by the market with today’s flattening. Good evening, Ed Disclaimer: “This material was prepared by Local Fixed Income trading desk of Itaú Unibanco, based on reliable public sources, not reflecting the opinion of Itaú Unibanco and the area responsible for its creation and it should not be considered as an analysis or consulting material of investments”.

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