What Did XP Recommend for Investment Portfolios?
XP has advised investors to take partial profits on inflation-linked government bonds (NTN-Bs) and gradually shift into high-quality private credit, while also identifying favorable upside asymmetries in the Ibovespa. The guidance was published in a report distributed to clients and covered by InfoMoney, analyzing the performance of local assets following a recent rally driven by yield curve compression.
According to the brokerage's analysts, the sharp appreciation of government debt has already priced in a large portion of the asset class's projected returns. With yields on NTN-Bs falling, mark-to-market capital gains have already been realized, reducing the residual premium available to investors who remain fully exposed to these longer-dated sovereign instruments.
On the other hand, the report highlights that rising yields in the tax-advantaged credit market have restored the appeal of corporate debt. In XP's view, top-tier companies are once again offering spreads that justify a phased reallocation, creating a tactical arbitrage opportunity between federal government debt and selected private issuances.
Why Did NTN-Bs Rally So Much, and Why Is It a Good Time to Sell?
A sharp compression in the yield curve generated extraordinary mark-to-market gains for Treasury IPCA+ bonds. As XP points out, the market's positive reaction to political developments and expectations of lower future interest rates accelerated the unit price appreciation of these instruments, bringing forward returns that would otherwise have taken months or years to materialize through coupon payments.
When the market-required yield to purchase an NTN-B drops, the bond's face value rises. Investors who bought when real interest rates were stressed saw a substantial jump in their net worth. However, that same drop compresses the yields locked in for anyone choosing to hold the bond going forward, reducing the buffer against potential negative shocks in the fiscal outlook.
The firm notes that given this dynamic, maintaining a 100% allocation in long-dated government bonds is no longer the most efficient risk-reward strategy. XP's recommendation is not to abandon sovereign fixed income entirely, but rather to lock in a fraction of these recent capital gains and direct capital toward segments where the risk premium has expanded once again.
Yield curve compression following the election pushed NTN-B prices higher.
Yields on tax-advantaged credit have widened, offering better margins in quality issuers.
Potential for domestic and foreign inflows if reforms unlock interest rate cuts.
What Is XP's Projected Upside for the Ibovespa?
XP's strategy team believes the Ibovespa has plenty of room to appreciate in an optimistic scenario contingent on structural reforms and fiscal discipline. According to the firm, consolidating this macroeconomic framework would pave the way for sustained benchmark interest rate cuts, unlocking capital inflows from local and foreign investors into equities.
The report emphasizes that last week's rally put Brazilian equities back on the radar of major asset managers. XP's strategy team has mapped out sectors with the strongest positive asymmetry, identifying discounted stocks with the operational leverage to rebound sharply if a consistent monetary easing cycle begins.
This favorable outlook, however, is not guaranteed: it depends directly on the perception of fiscal discipline. If reforms advance and help lower corporate capital costs, companies listed on the B3 are well-positioned to expand multiples and reprice earnings, capturing capital that remains parked in conservative, high-liquidity products.
Structural reforms and fiscal rigor consolidate rate cuts and attract domestic and foreign capital.
Without progress on reforms, the yield curve could unnerve markets and limit buying flow in equities.
What Changes in the Allocation Between Private Credit and Equities?
For investors managing fixed income and equities, XP's suggested strategy involves rebalancing portfolio weights without taking on excessive credit risk. The core of this move is trading an asset that has already delivered the bulk of its potential return for one that once again offers yields above recent historical averages.
Within tax-advantaged private credit, the firm's technical team stresses the importance of focusing strictly on high-credit-quality issuers. This rotation should not be done indiscriminately: the recommendation is for gradual and selective buying, avoiding overly leveraged issuers that could struggle if the macroeconomic environment faces unexpected turbulence.
As for equities, XP's analysis draws on the historical behavior of asset classes following election cycles. The brokerage points out that periods of political accommodation tend to unlock compressed valuations, benefiting companies that rely on domestic economic activity and falling interest rates to accelerate their operational results.
- Lock in partial profits on NTN-Bs: monetize recent mark-to-market appreciation.
- Gradually allocate to private credit: capture restored yields in debentures from solid issuers.
- Selective equity exposure: capture asymmetric opportunities in the Ibovespa tied to lower interest rates.
- Buy private credit without filtering: allocate to excessive credit risk merely for a higher headline yield.
- Remain fully passive in long NTN-Bs: ignore the fact that most of the projected return has already materialized.
What Does This Mean for Investors Holding These Assets?
If you held Treasury IPCA+ bonds and saw your balance grow after the election, XP notes that the bulk of that jump has already occurred. Holding the bond to maturity still delivers the contracted yield, but taking partial profits allows you to lock in capital gains and reinvest in tax-advantaged debentures from premium issuers that are once again paying attractive rates, while keeping dry powder to tap into an equity market rally in a disciplined way.
Individual investors frequently make the mistake of treating mark-to-market gains as permanent returns that will continue at the same pace indefinitely. XP's analysis via InfoMoney signals the exact opposite: the expected future return of NTN-Bs has shrunk following the rally, making the trade-off between volatility and returns less favorable than it was at the peak of market stress.
By rotating capital in a disciplined manner into private credit with higher spreads, investors protect accumulated wealth and establish a recurring, tax-exempt income stream through incentivized debentures. At the same time, they preserve the capacity to increase equity exposure in companies identified by the report as having the best asymmetry profiles.
The brokerage's primary message is one of pragmatism: leverage the relief in the yield curve to harvest extraordinary gains from Tesouro Direto, secure attractive yields in safe corporate credit, and position portfolios for potential Ibovespa expansion if fiscal discipline justifies further interest rate cuts.
