Brazil Swap Rates Rise as Job Gains Exceed Forecast; Real Falls

Brazil’s swap rates climbed, erasing declines, as employers created more jobs in February than forecast, spurring speculation the central bank will increase borrowing costs to contain inflation.

Swap rates on the contract due in January 2016 rose for the first time in five days, increasing two basis points, or 0.02 percentage point, to 9.04 percent at 5:36 p.m. in Sao Paulo after dropping five basis points. The real depreciated 0.2 percent to 1.9883 per U.S. dollar.

Employers added a net 123,446 jobs last month after a net increase of 28,900 in January, the Labor Ministry reported at 3 p.m. in Brasilia. The median forecast of analysts surveyed by Bloomberg was for a net gain of 95,148.

The jobs report “was surprising, a lot stronger than the market expected,” Paulo Nepomuceno, a fixed-income strategist at Coinvalores CCVM in Sao Paulo, said in a telephone interview.

The swap rates dropped earlier after Folha de S. Paulo reported that increases in borrowing costs will be decided by the central bank, not the market, indicating that policy makers will wait until May to lift interest rates from record lows instead of a boost next month. The newspaper cited unidentified government assistants; the central bank declined to comment when reached by Bloomberg News.

Minutes of the central bank’s March 5-6 meeting indicated that an increase in the target lending rate from 7.25 percent wasn’t imminent as policy makers said “a cautious management of monetary policy” was needed. The monetary policy committee will next meet April 16-17 and May 28-29.

To contact the reporters on this story: Marisa Castellani in Sao Paulo at mcastellani7@bloomberg.net; Julia Leite in New York at jleite3@bloomberg.net

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

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