Brazil Rate Futures Fall as Central Bank Raises Selic Less Than Forecast

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  • Posted on April 25, 2011


    Yields on short-term Brazilian interest-rate futures contracts fell, while those maturing in 2012 and beyond rose after the central bank increased borrowing costs last week less than economists had expected.

    Yields on the futures contract due in May fell two basis points, or 0.02 percentage point, to 11.90 percent at 8:38 a.m. in New York. The yield on the contract due in June fell 6 basis points to 11.90 percent. Yields on the contract due in January rose 2 basis points to 12.25 percent.

    Policy makers raised the benchmark Selic rate on April 20 by 25 basis points to 12 percent, less than the 50 basis point median estimate of 58 analysts surveyed by Bloomberg. Yields on longer-term contracts are rising on speculation that policy makers may need to step up rate increases in the future, said Andre Perfeito, chief economist at Gradual Investimentos in Sao Paulo.

    “The market is going to remain in a serious discussion over whether there will be more tightening or not,” Perfeito said in a telephone interview. “The market is saying, ‘OK, you can raise rates less now, but you’re going to have to do more in the future.'”

    Policy makers said in a statement that an adjustment of monetary conditions for a “sufficiently long period” is the “most adequate” strategy to guarantee inflation returns to its 4.5 percent target in 2012. Markets in Brazil were closed on April 21 and April 22 for a national holiday.

    The real advanced 0.1 percent to 1.5649 per dollar at 8:18 a.m. in New York, from 1.5663 on April 20.

    To contact the reporters on this story: Josue Leonel in Sao Paulo at jleonel@bloomberg.net; Gabrielle Coppola in Sao Paulo at gcoppola@bloomberg.net

    To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

    Bloomberg/AC