Meirelles Dollar Loan Rates Top Libor by Most in Six Months

Brazilian dollar-based loan rates are climbing to a six-month high relative to those overseas as central bank President Henrique Meirelles boosts purchases of the greenback to slow the real’s world-beating rally.

Contracts due in January known as cupom cambial, a measure of annual dollar borrowing costs in Brazil, rose to 1.89 percent on Sept. 13, the highest level since July 23. The rate has jumped 11 basis points, or 0.11 percentage point, since Sept. 8, when the central bank started holding two daily auctions to buy dollars, helping create a shortage of the U.S. currency in the Brazilian loan market.

BNDES Sells 750 Million Euros of 7-Year Notes to Yield 4.243%

Sept. 9 (Bloomberg) -- Brazil’s state development bank, known as BNDES, sold 750 million euros of seven-year bonds, according to a person familiar with the offering.

The notes priced to yield 4.243 percent, or 200 basis points over the benchmark mid-swap rate,

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.