Brazil Swap Rates Drop Second Day After Rate Move; Real Advances

Brazil’s swap rates headed for the biggest weekly drop in 11 months after policy makers raised borrowing costs less than some analysts had forecast and signaled that increases this year may be limited.

Swap rates on the contract due in January 2014 fell five basis points, or 0.05 percentage point, to 7.79 percent at 9:58 a.m. in Sao Paulo, pushing the five-day decrease to 38 basis points, the most since the period ended May 18. The real advanced 0.3 percent to 2.0129 per dollar, paring its loss since April 12 to 2.2 percent.

Swap rates declined even as prices through mid-April rose more than economists forecast. Prices as measured by the IPCA-15 price index jumped 0.51 percent in the month through mid-April, the national statistics agency said in a report published on its website. That was more than forecast by all except three of 38 economists surveyed by Bloomberg, whose median estimate was for a 0.46 percent increase.

“The monetary policy committee showed a high tolerance for inflation, and this shouldn’t change because of the IPCA-15,” Tony Volpon, the head of research for the Americas at Nomura Holdings Inc., said by phone from New York.

The central bank’s board this week voted 6 to 2 to raise the target lending rate by 25 basis points to 7.50 percent from a record low 7.25 percent. A survey by Bloomberg showed that 18 of 58 analysts forecast an increase of 50 basis points.

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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