Brazil Interest-Rate Futures Yields Decline on Slowdown Concern

Yields on Brazilian interest-rate futures fell after economists cut their 2011 growth forecast for a fifth straight week, fueling speculation the central bank will act further to shore up the economy amid the global slowdown.

The yield on the contract due in January 2013 dropped four basis points, or 0.04 percentage point, to 10.19 percent at 9:42 a.m. in Sao Paulo.

Brazil’s economy will expand 3.2 percent this year, according to the median forecast in a Nov. 4 central bank survey of about 100 economists published today, down from an estimate of 3.29 percent the previous week. Global stocks fell today on concern Italian Prime Minister Silvio Berlusconi will fail to win a majority for a parliamentary vote, worsening Europe’s debt crisis and further jeopardizing the global recovery.

“The situation remains pretty bad in terms of economic and political indicators in Europe,” said Andre Perfeito, chief economist at Gradual Investimentos in Sao Paulo. “That brings down activity in Brazil and translates into more space for the central bank to cut rates. Activity numbers in Brazil are coming in consistently bad.”

The central bank has lowered the benchmark Selic rate twice since August, to 11.5 percent.

The real was little changed at 1.7516 per dollar.

To contact the reporters on this story: Josue Leonel in Sao Paulo at jleonel@bloomberg.net; Alexander Cuadros in Sao Paulo at acuadros@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos in New York at papadopoulous@bloomberg.net

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