Brazil Rate-Futures Yields Rise on Inflation Jump; Real Declines

Yields on Brazilian interest-rate futures contracts rose the most in more than a week after an unexpected rise in inflation fueled speculation the central bank may shorten its cycle of interest-rate cuts.

The yield on the contract due in January 2013 rose five basis points, or 0.05 percentage point, to 10.09 percent at 9:47 a.m. in Sao Paulo.

Consumer prices in Sao Paulo rose 0.61 percent last month, compared with 0.60 percent a month earlier, according to the Foundation Economics Research Institute. The median estimate of 17 economists surveyed by Bloomberg was for inflation to slow to 0.47 percent.

“The jump in the index was a surprise, it came well above expectations of the market,” Newton Rosa, chief-economist at SulAmerica Investimentos, said in a telephone interview from Sao Paulo. The index “is helping the jump in the DI.”

The real weakened 0.1 percent to 1.8329 per dollar after surging 2.22 percent to 1.8307 yesterday, the biggest jump in two months.

To contact the reporters on this story: {Josue Leonel} in Sao Paulo at jleonel@bloomberg.net; {Gabrielle Coppola} in Sao Paulo at gcoppola@bloomberg.net

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