Brazil Swap Rates Drop on Rousseff Comment; Real Little Changed

Brazil’s swap rates fell for the first time in four days as comments from President Dilma Rousseff encouraged speculation that policy makers will keep borrowing costs at record lows through the first half of 2013.

Interest rates are on track to converge with international levels, Rousseff said in a meeting with business leaders in Paris, adding that Brazil needs to reduce the cost of capital.

Swap rates on the contract due in January 2016 decreased six basis points, or 0.06 percentage point, to 8.16 percent at 1:29 p.m. in Sao Paulo. The real was little changed at 2.0805 after closing on Dec. 7 at 2.0751, the strongest since Nov. 14.

Swap rates tumbled last week as Itau Unibanco Holding SA (ITUB4) forecast policy makers will resume cutting borrowing costs next year after a report showed gross domestic product expanded in the third quarter at half the pace economists forecast.

Policy makers left the target lending rate unchanged at a record low 7.25 percent last month, following 10 straight reductions. Traders use interest-rate swaps to bet on the direction of borrowing costs.

Gross domestic product in the largest emerging economy after China grew 0.9 percent in the third quarter from a year earlier, the statistics agency reported Nov. 30. The median forecast of economists surveyed by Bloomberg was for 1.9 percent expansion.

To contact the reporter on this story: Blake Schmidt in Sao Paulo at bschmidt16@bloomberg.net

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

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