Brazil Swap Rates Rise on Industrial Output; Real Appreciates

Brazil’s swap rates rose for a third day as industrial output in December beat forecasts, boosting speculation that the central bank will increase borrowing costs to contain inflation.

Swap rates on the contract due in January 2015 climbed four basis points, or 0.04 percentage point, to 7.99 percent at 10:15 a.m. in Sao Paulo, the highest level since Nov. 22 on a closing basis. They have climbed three basis points this week. The real advanced 0.2 percent to 1.9884 per dollar, extending its gain since Jan. 25 to 2.1 percent, the biggest among major Latin American currencies tracked by Bloomberg.

Brazil’s industrial production was little changed in December from a month earlier after a 1.3 percent decline in the prior month, the national statistics agency reported today. The median forecast of 29 economists surveyed by Bloomberg was for a 0.4 percent drop.

“The industrial production number was a little better than expected,” Thiago Carlos, an economist at Link SA in Sao Paulo, said by phone. “Economic activity remains weak and inflation is high.”

The real rallied to a level stronger than 2 per U.S. dollar on Jan. 28 for the first time since July as the central bank intervened to boost the currency as inflation accelerated.

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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