Etherfuse offers short-term government bonds on chain. We could tokenize other debt, but we chose short-term paper. It is more stable, less risky. And, by investing in short-term paper in yielding countries, like Brazil, we can get a good interest rate.
Brazil is timely, right now. Investors are shocked at the results of the Presidential election that ushered in a progressive candidate, Luiz Inacio Lula da Silva, Lula, for a fourth term. It was almost a sure bet that the right-wing candidate was going to win, but he didn’t. After the election results, the currency went down 10%, the stock market went down 10%. The yield on the Brazilian ten-year bond went from 12.77 to 15.61%, 2.93% up.
For investors that must manage capital and liquidity, Brazil seems to be a good area to hold now.
First, Lula’s first and second terms were good for the markets, and he left office with an 80% approval rating. When he took office for the first time in 2022, the ten-year bond yielded over 20%. It got as low as 7% and finished his term at 13.24%. In Lula’s first two terms, the stock market went up.
There is no promise this will happen again, but the point is that often things are not as bad as they seem at first glance.
Second, although the currency went down 12% when the market opened, it recovered 2% within an hour. Until more is known as to what Lula will do, the Brazilian real at these levels does not seem like a huge risk.
Third, on Etherfuse short-term Tesouro paper you get an 8+ percent interest return over USD treasuries.
Essentially, you have a new president who is probably not as bad as feared for bonds, stocks, and the currency. You are buying a 10% currency cheaper, and you are getting 10% more than on USD paper.
Risk may increase in the future. In emerging markets, it usually does, whether there is a political event or not.
The point is you are getting paid to hold short-term Brazilian paper and getting the currency cheaper.
Brazilian Tesorous- Why We Do What We Do.
This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.
