Brazil Futures Rate Rises to Five-Month High on Inflation, China

Brazil’s yield on the most traded interest-rate futures contract rose to a five-month high as inflation quickened more than expected and as commodities rallied after manufacturing in China climbed in November.

Investors raised bets the central bank will increase its benchmark rate to curb price growth, with the yield on the contract due in January 2012 surged 8 basis points to 12.07 percent at 6:30 a.m. in New York, the highest intraday level since July 1. Yields on most other contracts due before 2014 also rose.

Consumer prices as measured by the IPC-S index rose 1 percent in November, the Getulio Vargas Foundation said today. That’s the fastest acceleration since January, and more than the 0.9 percent median estimate of 16 economists surveyed by Bloomberg.

Prices of copper, soy and oil climbed and the real strengthened as the Purchasing Managers’ Index in China, Brazil’s biggest trading partner, grew more than expected in November, climbing to 55.2 from 54.7 the previous month, boosting the outlook for the global economy and purchases of higher-yielding, emerging-market assets.

“Rates are reflecting the increase in commodities and the transmission of that to local prices,” Yann Grandjean, chief exnomist at Fundacao Petrobras de Seguridade Social, which oversees 45 billion reais ($26 billion) in assets, said by telephone from Rio de Janeiro today.

The real appreciated to the strongest level in three weeks versus the dollar, trading 0.5 percent up at 1.7051 from a close of 1.7143 yesterday.

Real Strength

“The market livened up with the Chinese data,” Francisco Carvalho, a director at Sao Paulo-based BGC Liquidez DTVM Ltda., said in a telephone interview today. “Expectations of tightening in rates prevent the real’s depreciation.”

The currency of Latin America’s biggest economy has rallied 36 percent since the start of 2009, making it the best- performing emerging-market currency over the period, as near- zero interest rates in developed nations prompt investors to seek higher yields. Brazil’s benchmark Selic interest rate, compares with rates of 0.25 percent in the U.S. and 0.1 percent in Japan.

To contact the reporter on the story: Ana Monteiro in Johannesburg at amonteiro4@bloomberg.net

To contact the editor responsible for this story: Francisco Marcelino at mdeoliveira@bloomberg.net

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