Brazil Rate Futures Fall as European Crisis Fuels Rate Cut Bets

Yields on most Brazilian interest- rate futures contracts maturing before January 2014 fell as the deepening debt crisis in Europe fueled bets the central bank will continue lowering borrowing costs.

Yields on the contract due in January 2013 declined five basis points, or 0.05 percentage point, to 10.38 percent at 8:48 a.m. in New York.

Traders are betting Brazilian central bank President Alexandre Tombini will continue cutting interest rates to shield the economy from a European banking crisis that is hurting global growth. Tombini cut the benchmark interest rate a half point to 12 percent on Aug. 31, after raising it at the previous five policy meetings, citing a “substantial deterioration” in the global economy.

“This most recent volatility gives the central bank assurance to continue with its monetary policy,” said Luciano Rostagno, head strategist at CM Capital Markets in a telephone interview from Sao Paulo. “The market is beginning to believe in more aggressive cuts.”

The real gained 0.1 percent to 1.8042 per dollar, from 1.8059 yesterday.