Brazil’s swap rates dropped after a report showed inflation slowed more than forecast, fueling speculation that the central bank will keep borrowing costs at record lows to support the economy.
Swap rates due in January 2015 fell one basis point, or 0.01 percentage point, to 7.78 percent at 10:12 a.m. in Sao Paulo after rising nine basis points yesterday, the most this month. The real slid 0.1 percent to 2.0437 per dollar.
The IGP-M price index increased 0.41 percent in the 10 days through Dec. 31 from a month earlier after climbing 0.69 percent in the prior period, the Getulio Vargas Foundation reported today. The median forecast of 14 analysts surveyed by Bloomberg was for a 0.5 percent advance. The gauge is composed of 60 percent producer prices, 30 percent consumer prices and 10 percent construction costs.
“Local swap rates should be responding to the inflation indicators,” Octavio de Barros, an economist at Banco Bradesco SA, wrote in an e-mailed report today.
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