Treasury cancels auctions of fixed-rate and inflation-linked securities scheduled for this week

The National Treasury canceled this Monday (26) the auctions of fixed-rate securities linked to inflation scheduled for Tuesday (27) and Thursday (29). The measure was taken on a day of tension in the financial market following the victory of current president Luiz Inácio Lula da Silva (PT) over Flávio Bolsonaro in the second round of the presidential election.

At the same time, the agency maintained the auction of securities linked to the Selic basic interest rate scheduled for Tuesday.

"The National Treasury will continue to monitor market conditions and will act to ensure the smooth functioning of the public securities market and other related assets," the Treasury said in a statement.

The cancellation of the auctions comes amid a sharp rise in future interest rates and a significant drop in Brazilian assets this Monday, one day after Lula's re-election in the second round of the presidential election, held on Sunday.

The Brazilian Stock Exchange activated the circuit breaker this Monday, after leading Brazilian assets to show heavy losses. It is the first time that the mechanism has been activated since March 2020, during the coronavirus pandemic.

The circuit breaker is a mechanism that temporarily interrupts trading on the Stock Exchange in moments of strong downward fluctuations. During the suspension, the purchase and sale of shares, derivatives and private fixed income securities are interrupted so that the market stabilizes.

The mechanism is activated when the fall of the Ibovespa reaches certain levels. If the index falls by 10% compared to the previous trading session's close, operations are suspended for 30 minutes. After reopening, if the decline reaches 15%, the interruption lasts for one hour. If the drop reaches 20%, B3 may suspend trading again for a period that the Exchange itself will define.