Brazil DI interest rate futures close mixed on fiscal doubts

Brazilian interbank deposit futures (DI) closed without a clear direction on Wednesday, October 7, 2026. Short-term contracts edged lower in line with priced-in Selic cuts, while long-term contracts edged higher to recover a small part of the drop of more than 100 basis points seen over the previous two sessions.

The DI contract for January 2028 closed at 12.605%, compared to 12.61% at the previous settlement. The contract for January 2029 fell from 12.46% to 12.435%, while the contract for January 2031 rose from 12.57% to 12.600%. Market participants noted that investors still do not see a fiscal plan that creates room for larger interest rate reductions.

In the United States, the 2-year Treasury note yield fell to 4.758%, the 10-year yield was virtually flat at 5.291%, and the 30-year bond yield rose to 5.670%. Treasury yields moderated after a 39-billion-dollar 10-year auction, the largest since 2000, drew above-average demand, while Federal Reserve minutes pointed to another potential rate hike this year.

Guilherme Abbud, founding partner and chief investment officer at Persevera Asset, noted that local players remain cautious about anticipating a strong fiscal adjustment, leaving risk premiums in the curve. Abbud noted that while a sustainable trajectory is often debated around a primary balance near 0.5% of GDP, Brazil faces a nominal deficit near 10% of GDP.

Eduardo Velho, chief economist at Bravonte Capital, stated that a renewed drop in yields will depend on upcoming election polls and fiscal policy developments for 2027. João Abdouni, investment analyst at EQI Research, added that following Monday's sharp moves, the environment calls for a gradual recalibration of allocations rather than major portfolio shifts.