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Local Assets May Extend On Tuesday's Gains Ahead Of Fed/Copom Decisions

BRAZIL
  • The Brazilian real firmed and the DI curve shifted lower on Tuesday as ministers appeared to agree that precatorios must be paid while Brazil's fiscal rules must continue to be respected.
  • Potential plans would keep spending below the cap and open space for the government's new flagship social program called "Auxilio Brasil" according to Globo.
  • The currency strength may also be in preparation for the impending hike from the BCB later today, where some analysts are calling for even bolder action than the 100 basis point median estimate hike foreseen.
  • Particular pressure was relieved in local swap rates yesterday as medium-longer term tenors fell around 30 basis points.
  • Potential tailwinds for local assets may continue as China's central bank boosted market liquidity, avoiding a major sell-off in the local financial market – prompting a recovery in equity and commodity indices overnight.
  • *Separately, Brazil's health minister tested positive for the coronavirus in New York after President Jair Bolsonaro spoke at the U.N. General Assembly on Tuesday.
    • Brazil's government said in a statement that Marcelo Queiroga was in good health and would remain in isolation in the United States.
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