Brazil's Treasury has seen improved market conditions since it cancelled an auction of inflation-linked bonds, a senior official said on Friday when asked whether further interventions might be needed.
At a press conference, Treasury debt operations head Helano Dias said the auction of so-called NTN-Bs earlier this week was suspended due to technical strains, as the market faced more complex price formation for these securities in particular.
Dias said there had been a relevant flattening of the yield curve in recent days.
"We continue to monitor markets closely. If we see a need for extraordinary action, cancelling an auction, we will inform the market," he said.
"But this week we have seen a general improvement," Dias added.
Dias said the Treasury addresses strains in the secondary debt market in four main steps: first by reducing auction supply, then by offering significantly smaller lots, followed by cancelling auctions, and, if necessary, conducting buy and sell operations or buybacks to provide liquidity.
He stressed the steps are not necessarily sequential and depend on market conditions, which the Treasury monitors.
Dias said expectations of higher U.S. interest rates have contributed to market pressure, adding that shifts in oil prices have also reduced the appeal of NTN-Bs.
He noted that at the start of the year markets had expected around 50 basis points of U.S. rate cuts, but are now pricing in increases of up to 25 basis points this year.
In Brazil, he added, the yield curve also underwent sharp repricing amid doubts over whether the central bank will effectively pursue its 3% inflation target.
Compared with the volatility seen in March after the outbreak of the U.S.-Israel conflict with Iran, however, Dias said current pressures are markedly lower.
"The current move is more natural, as markets reposition for a new monetary policy outlook, with lower uncertainty," he said.