CDb

CDB stands for Certificado de Depósito Bancário, a fixed-income security issued by banks in Brazil to raise funds for lending activities. Investors buy CDBs from banks and receive interest over a defined term or based on a reference rate. They are a common alternative to savings accounts within Brazilian fixed-income portfolios.

Most CDBs are either prefixados, with a fixed rate set at issue, or pós-fixados, whose return is linked to a reference such as the CDI (Interbank Deposit Certificate). There are also CDBs indexed to inflation, such as IPCA, and some products combine features. Some CDBs offer liquidity during the term, including options with daily liquidity, while others are strictly term investments with penalties for early redemption.

Purchasing typically occurs through banks or brokerage platforms. CDBs are not traded on the stock exchange. Early redemption terms vary by product; some allow withdrawal with little or no penalty, while others require holding to maturity or impose penalties.

Taxation and guarantees: earnings from CDBs are subject to Imposto de Renda, withheld at source according to Brazil’s declining tax schedule based on the holding period. The CDB is insured by Fundo Garantidor de Créditos (FGC) up to 250,000 reais per investor per institution, providing a safety layer against issuer insolvency.

Risks: the primary risk is the credit risk of the issuing bank, especially beyond the FGC limit. Interest-rate risk and liquidity risk also apply, depending on the product's structure and term. CDBs are used to diversify fixed-income holdings and can offer higher after-tax yields than basic savings, depending on rate type, term, and liquidity needs.