Tesouro Direto (Brazil’s retail government bond program) is often many people’s gateway into the world of investing, since it is considered one of the safest investments in the country and allows investments with small amounts.
What Tesouro Direto is
It is a program that lets individuals buy federal government bonds directly online. In practice, when buying a bond, the investor is lending money to the federal government, which pays the amount back with returns on a future date.
Main types of bonds
- Tesouro Selic: yields in line with the Selic rate (Brazil’s benchmark interest rate) and is suited to an emergency fund because its price fluctuates little in the short term.
- Tesouro Prefixado: the rate of return is set at the time of purchase, but the bond’s price can fluctuate considerably until maturity.
- Tesouro IPCA+: combines a fixed rate with inflation as measured by the IPCA (Brazil’s official consumer price index), helping protect purchasing power over the long term.
Selling a bond before maturity can mean receiving more or less than expected, depending on how interest rates have moved at the time of the sale.
Risks and guarantees
Because they are issued by the federal government, government bonds are generally seen as among the investments with the lowest credit risk in the country. Even so, there is market risk (price fluctuation) for those who redeem before maturity, especially with Prefixado and IPCA+ bonds.