Brazil Swap Rates Head for Year’s First Monthly Drop; Real Rises

Brazil’s swap rates fell, adding to their first monthly decline this year, as a drop in industrial confidence added to speculation that central bank interest-rate increases will be limited.

Swap rates on the contract due in January 2015 dropped 26 basis points, or 0.26 percentage point, to 8.23 percent in April as of 10:04 a.m. in Sao Paulo. They were down one basis point today. The real appreciated 0.3 percent to 2.0023 per dollar, extending its monthly gain to 1 percent.

Industrial confidence fell for a second month in April to 104.2 from 105 in March, the Rio de Janeiro-based Getulio Vargas Foundation said today.

“The swap rate curve should respond to this weaker result in the industrial confidence index,” Octavio de Barros, the chief economist at Banco Bradesco SA, wrote in an e-mailed research note today.

Swap rates plunged earlier this month after the central bank raised benchmark borrowing costs a quarter percentage point, less than some analysts had forecast, to 7.5 percent at an April 17 policy meeting. The increase was the first in two years and raise the rate from a record-low 7.25 percent.

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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