Brazilian Rate Futures Yields Fall to Two-Month Low on Inflation Forecasts

Yields on Brazil’s interest-rate futures contracts fell to a two-month low as a drop in economists’ year-end inflation forecasts boosted speculation the central bank will slow the pace of interest-rate increases.

The yield on the contract due in January, the most traded in Sao Paulo, declined five basis points, or 0.05 percentage point, to 10.84 percent, the lowest level since May 25.

“Inflation expectations from the weekly survey are still trending down,” said Ram Bala Chandran, a Latin America currency and rates analyst at Citigroup Inc. in New York. “People were expecting this week’s inflation expectations to go higher, but they didn’t.”

The inflation rate will end the year at 5.35 percent, compared with a week-earlier forecast of 5.42 percent, according to the median forecast in a central bank survey of about 100 economists published yesterday. The central bank’s eight-member board, led by Henrique Meirelles, will raise the Selic to 11.75 percent by year-end, compared with a week-earlier forecast of 12 percent, the survey shows.

The real gained 0.2 percent to 1.7591 per dollar, from 1.7624 yesterday.

To contact the reporters on this story: Boris Korby in New York at Bkorby1@bloomberg.net;

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