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Chilean Swap Rates Tumble as Data Show Global Economies Slowing

Sept. 20 (Bloomberg) -- Chilean interest-rate swaps fell the most in a month after economic reports increased concern that global growth is slowing after a three-day market holiday.

The two-year swap rate dropped six basis points, or 0.06 percentage point, to 5 percent, matching the central bank’s benchmark rate. The five-year swap rate slid seven basis points to 5.19 percent. The yield on five-year central bank bonds fell two basis points to 5.36 percent.

Reports today showed manufacturing slowing in Europe and China, lower exports from Japan and more Americans than forecast filing jobless claims. Chile’s central bank has held its benchmark rate steady since January, and prices in the swaps market indicate traders expect the rate to remain little changed for the foreseeable future as strong internal demand offsets the loss of momentum in the global economy.

“The market today is closing the gap with international asset prices,” said Mauricio Olivares, a trader at Scotiabank in Santiago. “On Friday, we had stocks up and copper above $3.80 a pound. Coming back from holiday, stocks are falling and copper is at $3.76. Also, the swaps market has a cap because the chance of the central bank raising rates is zero and the probability of a rate cut, while low, is nevertheless there.”

Copper, which accounts for more than half of Chile’s exports, fell 1.4 percent today on the Comex in New York to $3.7605 a pound.

The peso, the region’s strongest major currency this year, climbed 0.1 percent to 470.3 per U.S. dollar. It earlier declined to 473.5 per dollar.

To contact the reporter on this story: Sebastian Boyd in Santiago at sboyd9@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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