“Inflation should remain at high levels globally, while we expect Brazilian economic activity to be strong and the central bank to end its tightening cycle with a 50 basis-point hike this month.”Įarlier this week, the Brazilian federal government announced a proposal to reimburse states for the revenue lost if they agree to slash the so-called ICMS tax on diesel and cooking gas to zero. “The risk-reward for that trade has become attractive again as the government moves to cut fuel prices,” said Gustavo Pessoa, a founding partner at Legacy in Sao Paulo. That’s a trade that was also touted by Adam Capital, Ibiuna Investimentos and SPX Capital over the past month. (Bloomberg) - Brazil’s top hedge fund managers are piling into inflation-linked bonds, worried that the government’s bid to reduce fuel prices will worsen the nation’s fiscal outlook and end up keeping consumer prices high for longer.įirms including Legacy Capital and MAG Investimentos have boosted their holdings of so-called NTN-B bonds - which pay a fixed interest rate plus inflation - over the past weeks to cover for the risk of President Jair Bolsonaro’s administration stepping up public spending to boost his popularity ahead of the October election.
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