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Brazil Rate-Futures Yields Decline as Sao Paulo Inflation Slows

Yields on Brazilian interest-rate futures contracts declined to a new low after a report that showed consumer prices rose less than forecast in Sao Paulo renewed speculation that policy makers will continue to cut borrowing costs.

The yield on the contract due in January 2013 fell four basis points, or 0.04 percentage point to 9.35 percent at 9:46 a.m. in Sao Paulo. The real weakened 0.3 percent to 1.7250 per U.S. dollar, from 1.7206 yesterday.

Consumer prices in Brazil’s largest city, as measured by the Foundation Economics Research Institute, rose 0.42 percent in the past month, compared with a 0.68 percent increase in the earlier period. The median estimate of 19 analysts surveyed by Bloomberg was for a 0.57 percent rise.

“The FIPE index is the second to come below estimates,” this week, Otavio de Souza Leal, chief economist at Banco ABC Brasil SA, said by phone from Sao Paulo.

Consumer prices in Brazil, as measured by the IPC-S index, rose 0.46 percent in the 30 days through Feb. 7, after climbing 0.81 percent in the previous period, the Getulio Vargas Foundation said yesterday. The increase was less than the 0.65 percent median estimate of 21 economists surveyed by Bloomberg.

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

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