Brazil Yields Drop as Bets for Hike in Rates Are Pushed Forward - Bloomberg.com

Brazil Yields Drop as Bets for Hike in Rates Are Pushed Forward - Bloomberg.com
By Camila Fontana

Oct. 22 (Bloomberg) -- Yields on Brazilian short-term interest-rate futures had their biggest drop in almost three weeks, signaling reduced expectations for an increase in borrowing costs early next year.

The yield on the contract due January 2011 tumbled 10 basis points, or 0.1 percentage point, to 10.27 percent, according to Bloomberg data. It was the largest slide since Oct. 2. The contract expiring October 2010 also fell 10 basis points, to 9.76 percent.

The central bank kept its key interest rate at a record low last night and said its level was “consistent” with a non- inflationary recovery, signaling that no increase in borrowing costs is imminent. In a statement accompanying the board’s unanimous decision to keep the benchmark rate at 8.75 percent, the bank repeated word-for-word the communique issued Sept. 2 when it paused after five straight cuts this year.

The decision brought “calm” to the market and pushed forward the expectations for a hike in basic rates, Jose Vicente Brito, head of proprietary trading at Banco Paulista, said in a phone interview from Sao Paulo.

To contact the reporter on this story: Camila Fontana Correa in Sao Paulo at cfontana@bloomberg.net.
Last Updated: October 22, 2009 14:13 EDT"