Brazil Rate Yields Fall Most Since May on U.S. Growth Concern

Yields on longer-term Brazilian interest-rate futures contracts fell by the most since May as investors anticipated slower economic growth in the world’s biggest economy.

Yields on the interest-rate futures contract due in January 2021 fell 12 basis points, or 0.12 percentage point, to 12.44 percent. The yield last fell 12 basis points during intraday trading on May 9. The real weakened 1.1 percent to 1.5661 per dollar at 5 p.m. New York time, from 1.5493 on July 29.

A rally in Treasuries sent 10-year yields to the lowest level since November after data showed U.S. manufacturing weakened to a two-year low. The world’s biggest economy expanded at a 1.3 percent annual rate in the second quarter, less than forecast, Commerce Department figures showed last week.

“We’re talking about a revision of U.S. growth prospects being priced in and that affects the long-end of Brazil, Latin America more generally,” Roberto Melzi, a Latin America strategist at Barclays Capital Inc, said in a telephone interview from New York. “There’s a big reassessment here.”

U.S. manufacturing expanded in July at the slowest pace in two years as new orders shrank and production eased. The Institute for Supply Management’s factory index fell more than forecast to 50.9 last month from 55.3 in June, the Tempe, Arizona-based group said today. Figures greater than 50 signal expansion.

The central bank said it twice bought dollars in the spot market today first at 1.5598 reais and then at 1.5603 each. Purchasing the U.S. currency is part of policy makers’ efforts to curb the real’s gains

“We’re back into sort of a little bit more risk-off right now, between ongoing risks and weak economic data,” Win Thin, global head of emerging-markets currency strategy at Brown Brothers Harriman & Co., said by phone. The U.S. manufacturing data “is a concern. We had a terribly weak GDP number for the U.S. on Friday, so that’s still out there,” he said.

To contact the reporters on this story: Benjamin Bain in New York at bbain2@bloomberg.net; Josue Leonel in Sao Paulo at jleonel@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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