Brazilian swap rates fell to a two- month low after analysts cut their forecasts for benchmark borrowing costs next year as faltering global growth cooled inflation expectations for Latin America’s biggest economy.
Brazil’s benchmark Selic rate will be 8 percent at the end of 2013, the lowest forecast this year, according to the median estimate in a weekly central bank survey of about 100 analysts published today, down from 8.25 percent last week. Policy makers have reduced the benchmark 5 percentage points since August 2011 to a record low 7.5 percent.
The survey “shows a slightly more benign environment for inflation,” Andre Perfeito, chief economist at Sao Paulo-based Gradual Investimentos, said in a telephone interview. “The market believes there is room for borrowing costs to remain permanently low in Brazil.”
Swap rate contracts maturing in January 2014 fell four basis points, or 0.04 percentage point, to 7.67 percent, at 6 p.m. in Sao Paulo, the lowest level on a closing basis since July 25. The real was little changed at 2.0268 per dollar.
Brazil’s HSBC Purchasing Managers’ Index for the manufacturing sector rose to 49.8 in September, compared with 49.3 in August, Markit Economics said today on its website. The median estimate from three analysts surveyed by Bloomberg News was for 50. Industrial production rose 2 percent in August from the month before, according to the median estimate of 36 economists surveyed by Bloomberg. The national statistics agency is scheduled to release the data tomorrow.
Brazil has implemented the most aggressive borrowing-cost cuts among G-20 nations, reduced bank reserve requirements and extended tax cuts on payrolls and consumer goods to spur the economy in the world’s second-biggest emerging market. Policy makers said last week that the impact of fiscal policy on demand has become “slightly expansionary,” limiting the room for additional monetary stimulus.
The real fell earlier as data showing manufacturing weakness in Asia outweighed an unexpected expansion in the U.S. and Spanish bond gains, Perfeito said.
“European stocks are recovering, but the Asian currencies and some commodities lost on Asian indicators,” he said.
A Chinese factory index was at 49.8 for September, the first time it has been below 50 for two straight months since 2009, a statistics bureau report showed in Beijing today.
Banks helped lead gains in European stocks after Spanish stress tests reported a capital deficit of 59.3 billion euros ($76.4 billion), less than the 100 billion euro bailout the country was given for its banks.
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