Bloomberg News

Brazil Rate Futures Drop on Speculation About New Savings Rules

April 24, 2012

Yields on Brazilian interest-rate futures contracts dropped on speculation the government is planning changes in savings-account rules to facilitate more cuts in borrowing costs.

The yields plunged last week after the central bank signaled in a statement that slowing inflation and weaker global economic growth may allow for further cuts in interest rates. The real strengthened today as a gain in stocks revived demand for higher-yielding assets in emerging markets.

“Changes to savings accounts rules would open space for more rate cuts,” said Flavio Serrano, a senior economist at Espirito Santo Investment Bank, in a phone interview from Sao Paulo. “Perceptions of global markets are a bit better today.”

The yield on the futures contract due in January 2014 slid 9 basis points, or 0.09 percentage point, to 8.86 percent after gaining six basis points yesterday. The yields touched a record low 8.82 percent on April 20. The real appreciated 0.1 percent to 1.8790 per U.S. dollar.

Brazil may have a chance to lower interest rates as a “moderation” of global economic growth could lead to lower inflation, Luciano Coutinho, head of Brazil’s state development bank, said yesterday in New York.

Policy makers lowered the benchmark lending rate last week by 75 basis points to 9 percent, almost the record low of 8.75 percent. They said in a statement accompanying the unanimous decision that they were “continuing the adjustment process of monetary conditions” given that inflation risks “remain limited.”

Savings Returns

The law requires minimum returns on savings accounts, spurring concern further reductions by the central bank will drive investors out of government bonds and into bank deposits.

Yields on rate futures fell on speculation inflation that was faster than forecast won’t be enough to keep the central bank from continuing to cut rates, Serrano said.

Prices, as measured by the IPCA-15 index, rose 0.43 percent through mid-April, compared with a 0.25 percent jump a month earlier. The increase was more than predicted by all except two of 42 analysts surveyed by Bloomberg, whose median estimate was for a 0.37 percent jump.

The real gained along with rising global stocks after approaching a 2012 low yesterday. European equities advanced after Spain and the Netherlands sold debt, easing concern the sovereign-debt crisis was spreading.

The real has slumped 8.6 percent since the end of February, the most in emerging markets, as the government tripled a tax on foreign loans and the central bank boosted purchases of greenbacks to help fuel growth in Latin America’s biggest economy. Brazil’s currency rallied 41 percent from the end of 2005 through the end of 2010, the most among developing-nation currencies.

Usinas Siderurgicas de Minas Gerais SA, Brazil’s second- largest steelmaker by output, said its net loss more than doubled in the first quarter as a weakening real contributed to higher financial expenses and sales fell.

To contact the reporters on this story: Josue Leonel in Sao Paulo at; Blake Schmidt in Sao Paulo at

To contact the editor responsible for this story: David Papadopoulos at

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