Turim Insights

A monthly conversation with our team about markets and strategies

04 October 2023

The challenging scenario in the interest rate market was the highlight of this month’s Turim Insights, with long-term rates reaching highs not seen in over a decade, amidst a backdrop of still robust activity in the United States.

In global monetary policy, the Bank of England (BoE) chose not to raise interest rates after the release of significantly milder inflation data. Meanwhile, in the United States, the Fed kept interest rates stable but made significant revisions to economic projections, pointing to a continued strong economy, demanding higher interest rates for a longer period. There was great anticipation regarding a possible revision of the neutral interest rate, which did not materialize in the committee’s projections.

In this context, the yield curve continued to show significant steepening, with some of the longer maturities already testing nominal highs close to 5%. If there is no reversal of this trend, we may be heading for the third consecutive year of negative returns in the global fixed-income market, something unprecedented in recent decades.

In Brazil, the Monetary Policy Committee (COPOM) maintained a stable pace of cutting the Selic interest rate, once again signaling that it does not intend to accelerate the rate reduction. The combination of this with the movement in global interest rates resulted in a new round of steepening in the local yield curve.

Finally, Carolina Assis, an illiquid investments analyst at Turim, shared insights from her recent trip to Singapore and China. Despite global concerns about China, Carolina highlights that some sectors, such as Biotech/Pharma, Climate Tech, and domestic consumption, still attract the attention of local Private Equity managers. Regarding the search for exposure in Asia, Carolina pointed out that “many foreign investors are seeking diversification away from China and dedicating more time to opportunities, especially in India and Japan. That said, both markets face challenges and opportunities in terms of liquidity, valuations, and growth that we need to monitor.”

The webinar also featured Leonardo Martins Moraes, Co-CEO of Turim; Nelson Abrahao, partner and strategist, and Henrique Santos, CFA, Portfolio Manager.