Bloomberg News

Brazil’s Swap Rates Drop as Economy Slows; Real Little Changed

February 20, 2013

Brazil’s swap rates fell after the central bank’s economic activity index rose in December less than forecast, boosting speculation that policy makers will delay raising borrowing costs to control inflation.

Swap rates due in January 2014 dropped five basis points, or 0.05 percentage point, to 7.70 percent at 9:50 a.m. in Sao Paulo, the first reduction in five days. The real was little changed at 1.9556 per dollar.

Brazil’s economic activity increased 0.26% in December from a month earlier, compared with growth of 0.57% in November, the central bank reported. The median forecast of 15 analysts surveyed by Bloomberg was for a 0.30 percent expansion.

“Any action by the central bank on rates could be more delayed than the swap curve is currently pricing,” Vladimir Caramaschi, the chief strategist at Credit Agricole Brasil SA in Sao Paulo, said in a phone interview.

The central bank has reduced the target lending rate by 5.25 percentage points since August 2011 to 7.25 percent in the most aggressive cuts among Group of 20 nations.

The annual inflation rate reached a one-year high of 6.15 percent in January and has exceeded the 4.5 percent midpoint of policy makers’ target range for more than two years.

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

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

Steve Ballmer, Power Forward
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