The yield on Brazil’s most traded interest-rate futures contract headed for an almost five-month high after central bank President Henrique Meirelles signaled policy makers may raise borrowing costs.
The yield on the interest-rate futures maturing in January 2012 rose 6 basis points, or 0.06 percentage point, to 11.95 percent. The contract last closed at that level on July 6. The yield on contracts due in January climbed 4 basis points to 10.74 percent at 12:36 p.m. in Sao Paulo.
Meirelles told economists yesterday the central bank was aware of potential credit problems that later proved to be limited to Banco Panamericano SA when the board held the benchmark Selic rate at 10.75 percent in September, according to a video posted on the bank’s website. Panamericano later received a 2.5 billion-real ($1.4 billion) bailout that “satisfactorily” solved the issue, Meirelles said.
“The market is already pricing in an almost 50 percent chance of an increase in the Selic in December, although it’s more probable in January,” Eduardo Alves de Castro, who helps oversee 116 billion reais of assets at Santander Asset Management, said in a telephone interview in Sao Paulo. “The central bank signaled it may increase the interest rate in the short run.”
Brazil’s real fell for the first time in three days against dollar on concern the euro-area debt crisis and China’s bid to tame inflation will stall a global economic recovery, curbing demand for emerging-market assets.
The currency of Latin America’s biggest economy weakened 0.3 percent to 1.7264 per dollar from 1.7216 yesterday.
Emerging-market stocks and currencies slumped and the extra yield investors demand to hold Spanish bonds instead of similar- maturity benchmark 10-year German bunds widened to a euro-era record after the Financial Times Deutschland reported euro-area policy makers are pushing Portugal to seek assistance from a 750 billion-euro ($1 trillion) bailout fund.
Chinese banks retreated amid speculation the government may cut the target for new lending next year. In South Korea, the defense minister quit while the nation prepared for joint military exercises with the U.S. starting Nov. 28 after an artillery attack by North Korea this week.
“The external factor is dominant in the currency market with the aversion to risk,” Roberto Padovani, chief economist at Banco WestLB, said in a telephone interview from Sao Paulo.
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