Brazil Rate-Futures Yields Decline on GDP, Global Growth Concern

Yields on Brazilian interest-rate futures contracts fell after a report that showed Europe’s economy contracted last quarter spurred bets the central bank will extend its cycle of interest-rate cuts to boost growth in Latin America’s largest economy.

The yield on the contract due in January 2013 dropped nine basis points, or 0.09 percentage point, to 8.94 percent at 9:36 a.m. in Sao Paulo. The real weakened 0.5 percent to 1.7478 per U.S. dollar, from 1.7395 yesterday.

Traders stepped up bets on a longer cycle of rate cuts ahead of this week’s monetary policy meeting as signs the global economy is slowing fueled speculation policy makers will act more aggressively to spur growth. Brazil’s economy expanded 1.4 percent in the fourth quarter, below the 1.5 percent median estimate of 41 analysts surveyed by Bloomberg, the national statistics agency said today. Gross domestic product grew 0.3 percent from the previous quarter, beating the 0.2 percent estimate of 42 economists.

“GDP came within expectations and showed that the economy began to recuperate, but only moderately,” Luciano Rostagno, chief strategist at Banco West LB, said by phone from Sao Paulo. “As long as the external environment is bad, the market bets on a longer cycle of rate cuts.”

Europe’s gross domestic product shrank 0.3 percent from the third quarter, the region’s statistics office said today, confirming an initial estimate published on Feb. 15. Exports fell 0.4 percent and household spending declined 0.4 percent.

-- Editor: Richard Richtmyer

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