Brazilian Finance Minister Guido Mantega denied a newspaper report that he was called to a meeting on April 23 to discuss changes to rules guaranteeing returns for savings accounts. Yields on interest rate futures pared losses.
Belo Horizonte-based newspaper Estado de Minas reported today that President Dilma Rousseff wants to cut the benchmark interest rate to 8 percent by July, which would push yields on local bonds below government-mandated returns on savings accounts known as poupanca, after taking into account taxes and fees collected by asset managers.
“There is no meeting about poupanca,” Mantega told reporters in Washington today. “With interest rates at 9 percent there isn’t a need to change the poupanca.”
The central bank this week cut the benchmark rate 0.75 percentage point to 9 percent and left the door open for further cuts, saying that inflation risks are “limited”. The government will need to “address very quickly” the rules on savings accounts if it plans to cut the Selic rate below 8.5 percent, said Jankiel Santos, chief economist at Espirito Santo Investment Bank in Sao Paulo.
“Below 8.5 percent the saving accounts yield starts to become more attractive than the Selic rate,” Santos said in a telephone interview. ‘If they go further than 8.5 percent we may see investment migration from government bonds to savings accounts.’’
Yields on interest rate futures contracts pared losses after Mantega’s remark, as traders trimmed bets on deeper rate cuts.
Yields on the contract due in January 2014, after sliding as much as eight basis points, dropped four points, or 0.04 percentage point, to 8.86 percent at 2:10 p.m. in Sao Paulo.
Traders are betting the central bank will reduce the Selic rate to at least 8.75 percent in May, matching the record low it reached in July 2009.
Santos said he isn’t sure whether the switch from government bonds to savings accounts would happen in practice.
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