When searching for safe fixed-income investments, you'll constantly encounter the acronym CDI (Certificado de Depósito Interbancário). 'This CDB pays 100% of the CDI' is the most common marketing pitch. But what does it mean? CDI is a daily average interest rate generated by overnight, ultra-short-term, billion-dollar loans made exclusively between the commercial banks themselves. The Central Bank of Brazil mandates that all banks must close their daily balance sheets in the positive. When a bank suffers massive customer withdrawals and ends the day in the red, it must immediately borrow cash overnight from a rival bank that ended with a surplus. The interest charged on these colossal peer-to-peer bank loans forms the CDI rate. Because these operations are ultra-safe, the CDI rate mathematically tracks just 0.10% below the national baseline interest rate (the Selic). Therefore, whenever the government's monetary committee raises the Selic rate, the CDI automatically follows, and your fixed-income investments instantly yield more money daily.
