Brazilian Swap Rates Fall on Production Outlook; Real Declines

Brazil’s swap rates fell before a report tomorrow forecast to show a drop in industrial production, spurring speculation that policy makers will keep borrowing costs at record lows to support the economy.

Swap rates on the contract due in January 2015 dropped three basis points, or 0.03 percentage point to 7.70 percent at 10:18 a.m. in Sao Paulo. The real depreciated 0.1 percent to 2.0478 per dollar after rallying yesterday the most in a week.

“The industrial production indicator tomorrow may impact swap rates,” Darwin Dib, the chief economist at CM Capital Markets Asset Management, said by phone from Sao Paulo.

Industrial production in Latin America’s largest economy shrank 0.9 percent in November after a 0.9 percent increase in the prior month, according to the median forecast of 34 economists surveyed by Bloomberg before tomorrow’s report from the national statistics agency.

Swap rates also fell on concern the U.S. budget deal won’t reduce the deficit fast enough. Most major currencies including the real fell against the dollar on demand for a refuge.

“The U.S. avoided the fiscal cliff, but there’s a perception that the trajectory of the debt is unsustainable,” Dib said.

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

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

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