Busted CPI Target Bets Show Rousseff Concerns: Brazil Credit
This article is for subscribers only.
Bond traders are betting Brazil will miss its inflation target for the first time since 2003 as commodity prices jump and concern builds that President-elect Dilma Rousseff will fail to curb spending.
Investor expectations for annual inflation over the next two years, implied by the yield difference between the government’s inflation-linked and fixed-rate notes, rose to 6.65 percent as of yesterday, the highest since November 2008. That gap, known as the breakeven rate, tops the 6.5 percent upper limit in the central bank’s target range for consumer price increases.