Brazilian Rate Futures Yields Climb on Output; Real Rises

Yields on Brazilian interest-rate futures contracts climbed for the first time in more than a week after a report showing industrial production rose at the fastest pace in seven months spurred speculation policy makers will shorten a cycle of borrowing-cost cuts.

The yield on the contract due in January 2013 rose two basis points, or 0.02 percentage point, to 9.53 percent. The real rose 0.1 percent to 1.7468 per U.S. dollar.

Traders pared bets on deeper interest-rate reductions after industrial output increased 0.9 percent in December, up from a revised 0.2 percent rise in November. Analysts predicted a December increase of 1 percent, according to the median forecast of 39 economists surveyed by Bloomberg. The December number was the biggest jump since May 2011, when output rose 1.2 percent.

“The industrial output numbers show a trend of recuperation that supports the view for a shorter rate-cut cycle,” Mauricio Nakahodo, senior economist at CM Capital Markets in Sao Paulo, said in a telephone interview. “That’s influencing the DIs, on top of a more optimistic international environment.”

Production in December fell 1.2 percent from a year ago, the national statistics agency said in Rio de Janeiro today.

Brazil posted a budget deficit of 18.6 billion reais ($10.6 billion) in December, the central bank said in a report distributed today in Brasilia.

The currency has appreciated 6.9 percent this month, the best performance since October.

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