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Brazil Futures Rate Rises to Five-Month High on Inflation, China

Dec. 1 (Bloomberg) -- Yields on Brazil’s interest-rate futures contracts rose to the highest level in more than five months as inflation quickened more than forecast and commodities rallied after manufacturing in China climbed in November.

Investors raised bets the central bank will increase its benchmark rate to curb price growth. The yield on the contract due in January 2012 surged 14 basis points, or 0.14 percentage point, to 12.13 percent at 3 p.m. New York time, the highest close since June 23. The yields on all other contracts maturing in January 2013 or sooner also rose.

Consumer prices as measured by the IPC-S index rose 1 percent in November, the Getulio Vargas Foundation said today. That’s more than the 0.9 percent median estimate of 16 economists surveyed by Bloomberg.

Prices of copper, soy and oil climbed and the real strengthened as the Purchasing Managers’ Index in China, Brazil’s biggest trading partner, grew more than expected in November, climbing to 55.2 from 54.7 the previous month, boosting the outlook for the global economy and purchases of higher-yielding, emerging-market assets.

“Rates are reflecting the increase in commodities and the transmission of that to local prices,” Yann Grandjean, chief economist at Fundacao Petrobras de Seguridade Social, which oversees 45 billion reais ($26.4 billion) in assets, said by telephone from Rio de Janeiro today.

The real appreciated to the strongest level in three weeks versus the dollar, increasing 0.6 percent to 1.7049, from 1.7143 yesterday.

Real Strength

“The market livened up with the Chinese data,” Francisco Carvalho, a director at Sao Paulo-based BGC Liquidez DTVM Ltda., said in a telephone interview today. “Expectations of tightening in rates prevent the real’s depreciation.”

The currency of Latin America’s biggest economy is the best-performing emerging-market currency since the start of 2009, rallying 36 percent over the period, as near-zero interest rates in developed nations prompt investors to seek higher yields. Brazil’s benchmark Selic interest rate of 10.75 percent compares with rates of 0.25 percent in the U.S. and 0.1 percent in Japan.

To contact the reporter on the story: Josue Leonel at jleonel@bloomberg.net

To contact the editor responsible for this story: Francisco Marcelino at mdeoliveira@bloomberg.net

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