Brazil Swap Rates Fall on Outlook for Stalled Growth; Real Gains

Brazil’s swap rates dropped from a two-week high on speculation stalled economic growth will prevent the central bank from raising borrowing costs.

Swap rates on the contract due in January 2015 fell four basis points, or 0.04 percentage point, to 8.51 percent at 10:11 a.m. in Sao Paulo after climbing yesterday to 8.55 percent, the highest level since March 21. The real appreciated 0.2 percent to 2.0213 per dollar.

“The market is giving back some of the increase from yesterday,” Jankiel Santos, the chief economist at Banco Espirito Santo de Investimento in Sao Paulo, said in a phone interview. “The market doesn’t know with certainty what the central bank is going to do, so the swap rates are volatile.”

Swap rates rose yesterday on central bank President Alexandre Tombini’s comments this week that board members will wait for March inflation figures due to be released next week and other data before deciding on the next policy steps.

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

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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