Discover how to invest in Treasury Direct, learn about the types of government bonds, and choose the best one for your financial profile.
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?Why is Treasury Direct so famous among investors? Because it?s the only treasure that doesn?t need a map to be found.?
I believe that many investors, at the beginning, in their search for investment opportunities, must have typed something like ?How to make money with safe investments? or ?Safe and short-term investment? into Google. While Google is a great ally for learning, it can still make mistakes. It?s quite likely that you?ll stumble upon some betting sites during your investment searches. So, we?re here to answer: How to make money investing safely? With Treasury Direct!
We need to understand that Treasury Direct falls under the classification of fixed income, which is itself characterized as debt securities. But hold on, let?s delve deeper into this. Imagine you lend money to your best friend. Now he has your money, and you have his word that he will honor the commitment to repay you. That?s a debt security, a right to receive a certain amount, a promise.
After understanding what a debt security is, you might ask: ?Okay, but to whom am I lending my hard-earned money when I buy Treasury Direct?? To the government, I answer. The issuance of this type of product serves, among other functions, to raise funds for the government.
Treasury Direct vs. Government Bonds:
A common question that arises when I talk to friends and clients is the difference between Treasury Direct and Government Bonds. The answer to this question is simple: None! (When we?re talking about the product). The difference lies in how they are traded. That is, Treasury Direct is a tool from the government in partnership with B3 that makes it possible to purchase Government Bonds, serving as the primary issuance of these securities. When we refer to Government Bonds, we are talking about the secondary market for these products, which are not traded by the treasury but by other investors.
Which is Ideal?
It depends. Treasury Direct has a lower entry cost, while Government Bonds allow investment by legal entities. In Treasury Direct, you also pay an annual custody fee to B3 of 0.20%. Both have the incidence of IR (Income Tax) and regressive IOF (Tax on Financial Operations).
Types of Bonds and Returns:
When we open the treasury or brokerage website, we can see that there are several acronyms for each type of product. Don?t worry about them; focus on understanding the form of return and the payment flow of the remunerations. The table below shows the characteristics of each bond, but I repeat: Don?t memorize, seek to understand!
- Pre-Fixed: Bonds that pay a fixed interest rate at maturity. Ideal for those who want to know exactly how much they will receive in the future.
- Post-Fixed: Bonds that are linked to the Selic rate. Recommended for those who desire liquidity, as they can be redeemed at any time.
- Hybrid (IPCA+): Bonds that pay a fixed rate plus the variation of the IPCA (official inflation index). Good for those who want protection against inflation.
- Semiannual Interest: This is a subcategory of pre-fixed and IPCA+ bonds, where part of the return is paid semiannually to the investor.
Liquidity:
This is an extremely important point! All Treasury Direct and Government Bonds have daily liquidity but also feature mark-to-market valuation!
Types of Mark-to-Market:
This topic can confuse many beginner investors. Here is where fixed income stops being ?fixed,? but don?t worry, let?s understand it better.
- Mark-to-Curve: Reflects the value of bonds based on their original interest rate and time until maturity. It?s ideal for long-term investments and for investors who plan to hold the bonds until maturity, offering less volatility and predictable returns.
- Mark-to-Market: Reflects the real market value of bonds daily. It?s ideal for short-term investments and active portfolio management, where liquidity and the ability to respond quickly to market changes are important.
