LFT

Key points

• LFT stands for Letra Financeira do Tesouro, a Brazilian federal government fixed-income bond.
• It has a floating rate indexed to the base interest rate, the Selic, tracking its variation over time.
• Because it is issued by the federal government and shows low price volatility, it is regarded as one of the lowest-risk assets in the domestic market.

What is the LFT?

LFT is the Letra Financeira do Tesouro, a debt instrument issued by the Brazilian federal government. By purchasing one, the investor lends funds to the National Treasury and receives, in return, a return tied to the economy's base interest rate. It is one of the bonds available in the retail public bond sale program and is often described as one of the most conservative investments in the market.

How it works

The LFT is a floating-rate bond, meaning its return is not known in advance in absolute terms, but follows a defined benchmark: the Selic rate. Its yield therefore tracks the variation of the base interest rate over time. If the Selic rises, the return rises along with it; if it falls, the return falls too. This feature makes the LFT a bond whose value fluctuates very little day to day, since it continuously adjusts to the prevailing interest rate.

This low volatility is what gives it a reputation for safety. Unlike fixed-rate bonds, whose price can swing considerably as interest rate expectations change, the LFT tends to preserve its value more steadily. Combined with the fact that it is issued by the federal government, considered the issuer with the lowest credit risk in the country, this makes it a benchmark for conservative investing in the Brazilian market.

It is worth distinguishing this concept from the crypto world. The LFT is a traditional financial market instrument, with its own rules, taxation, and risks, and should not be confused with cryptocurrencies or stablecoins. In particular, the fact that a stablecoin pegged to the real exists does not mean it yields like an LFT or tracks the Selic: a stablecoin seeks to maintain parity with the currency, not to replicate the return of a government bond. Treating the two as equivalent is a mistake.

Understanding the LFT helps interpret yield comparisons without improperly transferring them to assets that follow a different logic.

Why it matters

Understanding the LFT helps clarify how one of Brazil's most conservative fixed-income investments works, and avoids confusing traditional market benchmarks with the behavior of crypto assets. This is a financial context concept. It is an educational explanation and does not constitute investment or trading advice.

Limitations

Conservative fixed income does not mean the absence of risk: there is taxation, costs, and possible variation, and no investment is free of considerations. The LFT follows the logic of the traditional market and does not describe the behavior of stablecoins or cryptocurrencies. Using one as a benchmark for the other is incorrect. Nothing here constitutes investment or trading advice.