Brazil Swap Rates Decline on Inflation Report; Currency Advances

Brazil’s swap rates fell for a fourth straight day as a report showing slower-than-forecast inflation spurred speculation the central bank may refrain from raising borrowing costs this year.

Swap rates on the contract due in January 2015 dropped two basis points, or 0.02 percentage point, to 8.55 percent at 10:53 a.m. in Sao Paulo. The real appreciated 0.1 percent to 1.9809 per U.S. dollar.

Today’s below-forecast inflation reports and concern about the global economy “should influence the yield curve,” Octavio de Barros, the chief economist at Banco Bradesco SA, wrote in a research note.

Producer, construction and consumer prices, as measured by the IGP-M index, rose 0.24 percent from Feb. 21 through March 10, the Getulio Vargas Foundation reported today. The figure was less than the 0.25 percent median forecast of 15 economists surveyed by Bloomberg.

Minutes of the central bank’s March 5-6 meeting, published last week, indicated that an increase in the 7.25 percent target lending rate wasn’t imminent as policy makers said that “a cautious management of monetary policy” was needed.

To contact the reporter on this story: Gabrielle Coppola in Sao Paulo at gcoppola@bloomberg.net

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

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