Yields on Brazilian interest
rate futures contracts fell on Thursday as investors saw the
central bank signaling a pause in raising rates, though
analysts were cautious about reading too deeply into its
guidance.
Brazil's central bank raised its benchmark Selic interest
rate BRCBMP=ECI to 12.5 percent from 12.25 percent late on
Wednesday. For more see [ID:nN1E76I0KN].
The rate hike was expected but the statement accompanying
the decision removed language about a "prolonged" tightening
cycle, which some analysts read as a hint the bank could stop
tightening rates as soon as their next meeting at the end of
August.
"The statement from the central bank was a bit more dovish
than expected," said Luiz Nunes, director of Claritas Wealth
Management in Sao Paulo.
Investors, who had been largely divided on the possibility
of further rate rises before the Wednesday meeting, pushed
yields on rate futures down in Sao Paulo. The yield on the
contract due January 2012 DIJF2 dipped as low as 12.46
percent from 12.49 percent.
Yields on longer-dated contracts, however, edged up, with
the January 2014 DIJF4 contract at 12.72 percent from 12.69
percent, a sign investors saw the bank returning to tighter
interest rates in coming years.
The central bank's statement on Wednesday read, in its
entirety: "After evaluating the outlook and the balance of
risks for inflation, the Copom unanimously decided, at this
moment, to raise the Selic rate to 12.50 percent per annum,
without bias."
Statements in June and April had both mentioned a
"prolonged" tightening cycle, and the bank raised rates by 25
basis points at each of those meetings.
"What the exclusion of 'sufficiently long period' means is
open to debate," wrote Denis Blum, senior economist with
Bradesco Corretora in a note to clients. "For us, it just
signals that the monetary adjustment is close to its end, but
not necessarily at the end."
Of nine economists consulted by Reuters, only one, Austin
Ratings, changed their forecast for the year-end rate. Austin
now sees a year-end Selic of 12.50 percent, down from a
previous call of 12.75 percent.
More revealing, analysts said, would be the minutes from
the meeting, due for release on July 28.
The document "should bring more information about the next
steps in monetary policy," wrote Ilan Goldfajn, chief economist
of Itau Unibanco. Goldfajn is a former central bank director.
