Brazil holds ground
Citi says Brazil’s real has been surprisingly resilient — up about 4.2% YTD — even as geopolitics roiled markets, but domestic politics (a tight Lula–Flavio presidential race) now drives volatility more than external shocks. — The Treasury reportedly bought BRL50 billion to defend the 5.5 level after a ~2% post‑escalation dip, and BRICS trade in local currencies is being highlighted as a buffer. (x.com) (x.com)
Brazil’s Treasury carried out off‑schedule bond buybacks and special operations that totaled roughly BRL43.7 billion over two days as it stepped into local markets to calm volatility tied to the recent oil‑price shock and geopolitical escalation. (bloomberg.com) The intervention extended into a third day when the Treasury repurchased about BRL7.6 billion of fixed‑rate bonds on March 18, part of a sequence of repurchases that Bloomberg called the largest bond‑market intervention in more than a decade. (bloomberg.com) Some market trackers put the total liquidity injections close to BRL49–50 billion as authorities scrambled to steady both bond and FX liquidity after a near‑2% post‑escalation wobble in risk assets. (invezz.com) The onshore FX market swung: USD/BRL touched the mid‑5s at the peak of the move and was trading around 5.22–5.27 later in the week, leaving the real roughly 4–5% stronger year‑to‑date on major spot measures. (bloomberg.com) Monetary policy is feeding the dynamic — the central bank cut the Selic by 25 basis points to 14.75% on March 18, a modest easing that money managers said should support local assets even as it complicates the timing of further gains. (bloomberg.com) Domestic politics remains the swing factor for traders: market jolts since last December accelerated after Flavio Bolsonaro’s rise as a viable presidential contender, prompting episodic selloffs in Brazilian assets. (bloomberg.com) Separately, Brasília’s push to expand BRICS trade in local currencies continues to be touted as a structural buffer to dollar‑denominated shocks, but progress on cross‑border payment systems has so far been limited and leaders have deferred major implementation decisions. (agenciabrasil.ebc.com.br) Analysts warn the Treasury’s repeated market support is eating into the government’s liquidity cushion and has pushed domestic yields higher — Brazil’s 10‑year yield rose toward the high‑teens last week, underscoring the cost of the interventions for the public finances. (bloomberg.com)
