Brazil Swap Rates Rise After Central Bank Signal; Real Advances

Brazil’s swap rates climbed the most in almost two weeks after the central bank signaled yesterday that it is prepared to increase borrowing costs from a record low to contain inflation.

Swap rates due in January 2014 rose eight basis points, or 0.08 percentage point, to 7.75 percent at 9:36 a.m. in Sao Paulo. The real gained 0.2 percent to 1.9660 per dollar.

“The central bank is leaving the door open to a rate increase at the next meeting in case inflation surprises on the upside,” Luciano Rostagno, the chief strategist at WestLB do Brasil SA in Sao Paulo, said in a phone interview.

Policy makers dropped from their statement a pledge to keep the target lending rate at a record low for a prolonged period of time. They held the Selic at 7.25 percent for a third consecutive meeting.

To contact the reporters on this story: Blake Schmidt in Sao Paulo at bschmidt16@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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