Brazil’s Swap Rates Fall Amid Treasury Buybacks; Real Declines
Brazil’s swap rates dropped for the first time in six days as investors speculated the Treasury’s buyback auctions will reduce bond yields after a six-week rout.
Swap rates on the contract due in January 2015 fell 17 basis points, or 0.17 percentage point, to 10.29 percent at 10:23 a.m. in Sao Paulo, paring their increase this week to 72 basis points. The real dropped for a sixth straight day, depreciating 0.1 percent to 2.2605 per dollar.
The Treasury plans to buy back fixed- and floating-rate debt today in the fourth unscheduled auction in a week to bolster demand for the securities amid a market rout fueled by concern that the Federal Reserve will curtail stimulus. The real has tumbled 4.9 percent this week, the worst performance among 24 emerging-market currencies.
“It’s positive that the Treasury is doing these auctions because it helps to calm the market,” Ures Folchini, the head of fixed income at Banco WestLB do Brasil SA in Sao Paulo, said in a telephone interview. “Brazil is going to continue to follow external markets.”
Consumer prices as measured by the IPCA-15 index rose 0.38 percent in the month through mid-June, the national statistics agency reported today. The median forecast of economists surveyed by Bloomberg was for an increase of 0.36 percent. Annual inflation accelerated to 6.67 percent, higher than the 6.50 percent upper level of the central bank’s target range.
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