Brazilian Interest-Rate Futures Fall as Inflation Slows More Than Forecast

Yields on Brazilian interest-rate futures contracts fell for a sixth day after inflation decelerated more than analysts forecast in May, reducing bets for how much the central bank will raise borrowing costs.

Yields on the futures contract due in January 2013 fell one basis point, or 0.01 percentage point, to 12.47 percent at 5 p.m. New York time. The six consecutive days of declines in the yield is the longest streak since the period ended Aug. 16. The real posted its first decline in five days.

Consumer prices, as measured by the IPC-S index, rose 0.51 percent in the 30-day period ended May 31, compared with a 0.96 percent increase in the period ending May 22, the Getulio Vargas Foundation said today. The median forecast of 17 analysts surveyed by Bloomberg was 0.65 percent. Central bank President Alexandre Tombini told lawmakers on May 5 that inflation began slowing last month to levels in line with the government’s 4.5 percent target.

“There was a strong retreat in gasoline prices and also a deceleration in food prices,” said Andre Perfeito, chief economist at Sao Paulo-based Gradual Investimentos. “The central bank’s forecast is being clearly confirmed,” he said in a telephone interview.

The real fell the most in more than two weeks, weakening 0.9 percent to 1.5942 per dollar, from 1.5801 yesterday, as prices for Brazil’s commodity exports dropped and a report showed companies in the U.S. hired fewer workers last month than forecast.

‘Slowdown’
“Brazilians are afraid of a slowdown,” Alfredo Barbutti, an economist at Liquidez DTVM Ltda in Sao Paulo, said by phone. They are concerned, in part, because weaker global growth may cause commodities to decline, hurting the economy in Brazil, he said.

Prices for oil, sugar and coffee all fell in New York trading. Brazil is the world’s biggest exporter of sugar and coffee.

U.S. employment rose by 38,000 last month, the smallest increase since September, from a revised 177,000 in April, according to figures from ADP Employer Services. The median estimate in the Bloomberg survey called for a 175,000 advance for May.

The central bank said today it twice purchased dollars in the spot market, first at 1.5854 reais and then 1.5885 each. The bank also said today it had bought more than $34 billion worth of the U.S. currency this year through May 27. Policy makers use the tactic to try to curb appreciation in the real, which has strengthened 22 percent in the past two years.