Brazilian Inflation Slows to Government Target For First Time This Year

Brazil’s consumer prices rose less than expected in August, falling under the mid-point of the government’s target for the first time this year, the national statistics agency said.
Inflation in Latin America’s biggest economy slowed to 0.04 percent in August from July, less than the 0.08 forecast by 37 analysts surveyed by Bloomberg, the national statistics agency said in a report distributed in Rio de Janeiro today. Annual inflation through August slowed to 4.49 percent, less than the 4.53 percent forecast in the survey.

Lula May Offer Real-Linked Bonds Overseas as Yields Tumble

Brazil is considering selling its first real-linked bonds in international markets in three years as yields on the securities fall to the lowest since May relative to local debt.

The government’s international real bonds maturing in 2022 yield 250 basis points, or 2.5 percentage points, less than its domestic real debt maturing in 2021, according to data compiled by Bloomberg. The difference was 184 basis points on July 1. Deputy Treasury Secretary Paulo Valle said yesterday that it’s “very probable” the government will sell foreign bonds denominated in either reais or dollars by year-end.

The yield gap between local and foreign real bonds is widening as international investors seeking alternatives to near-record low rates in the U.S., Japan and Europe pile into Brazil’s real debt issued in overseas markets. Foreigners prefer to buy the international securities because they can trade them more easily and don’t have to pay local taxes, according to Morgan Stanley.

“It’s a fantastic opportunity to issue debt in your own currency in the external market now,” said Silvia Marengo, who manages Latin American debt with Falcon Private Bank in Zurich. “It makes a lot of sense from the government’s perspective.”

The yield on the international real bonds due in 2022 has plunged 131 basis points in the past two months to 9.13 percent. Yields on the 2021 real bonds issued in the local market dropped 65 basis points over that time to 11.63 percent. The gap between the two reached 255 basis points on Aug. 27, the widest since May 7.

Brazil's Central Bank Keeps Rate at 10.75% as Inflation Slows Below Target

Brazil’s central bank kept its benchmark interest rate unchanged at 10.75 percent after inflation slowed below target and as the global economic recovery falters.

Brazil May Pause at 10.75% on Below-Target Inflation, Slower Global Growth

Brazil’s central bank will probably keep its benchmark interest rate unchanged today after three straight increases as inflation has slowed below target and the global economic recovery falters.
Policy makers, meeting for the last time before October’s presidential election, will hold the benchmark rate at 10.75 percent, according to 46 of 57 economists surveyed by Bloomberg. Seven economists forecast a quarter-point increase, and four expect a half-point rise, betting higher borrowing costs are needed to prevent a rebound in inflation next year.

Greenspan Conundrum Is Lula's Gain as Long-Term Yields Sink

The biggest foreign purchases of Brazilian local bonds in three years are pushing longer-term borrowing costs below yields on two-year debt for the first time since October 2008.
Yields on fixed-rate government bonds due in 2017 have declined 106 basis points, or 1.06 percentage points, in the past three months to 11.49 percent. The plunge in 2017 yields put them as much as eight basis points below yields on notes maturing in 2012 last week. A year ago, longer bonds yielded 171 basis points more than the shorter-term securities.

Record low yields in the U.S. and Europe spurred foreigners to buy a net $16 billion of Brazilian bonds from January through July, compared with $9.1 billion for all of 2009, according to the central bank. International investors are piling into longer-term debt, helping trim President Luiz Inacio Lula da Silva’s borrowing costs, in part as a bet slowing inflation will push down rates in coming years, according to Citigroup Inc.

“We are seeing relentless inflows,” Dirk Willer, head of Latin America local markets strategy at Citigroup in New York, said in a telephone interview. “Some of the investors are betting on the convergence trade.”

Brazil Interest Rate Futures Drop to 11-Month Low on Global Growth Concern

Yields on Brazil’s interest-rate futures contracts declined to an 11-month low on speculation slowing global economic growth may prompt Central Bank President Henrique Meirelles to stop raising interest rates.

The yield on the contract due in January 2012 fell two basis points, or 0.02 percentage point, to 11.13 percent, the lowest level since September, at 9:22 a.m. New York time. At 10.69 percent, the contracts due in January 2011 imply the central bank may keep its benchmark borrowing costs at 10.75 percent for the remaining three policy meetings this year.

Itau Sees Brazil GDP Growing 7.5% ‘Chinese-Like’ Pace in 2010

Itau Sees Brazil GDP Growing 7.5% ‘Chinese-Like’ Pace in 2010
May 12 (Bloomberg) -- Brazil’s economy will grow at a faster, “Chinese-like rate” this year as a result of a stronger global economy and measures taken to stimulate domestic demand, Itau Unibanco Holding SA said.

Latin America’s biggest economy should expand 7.5 percent this year, above a previous estimate for 6.5 percent,