January 9, 2017 / 5:27 PM / 7 months ago

EMERGING MARKETS-Brazil rate futures slip on bets on sharp rate cut

SAO PAULO, Jan 9 (Reuters) - Yields on Brazilian interest
rate futures narrowed on Monday as traders increased bets that
the central bank would cut rates by an aggressive 75 basis
points this week.
    Expectations of a sharp rate cut grew after several
indicators showed inflation slowing faster than expected amid
few signs of an economic pickup. 
    Managers at Verde Asset Management SA, which runs Brazil's
largest hedge fund, said on Friday they had purchased fixed-rate
bonds on hopes of a 75-basis-point reduction. 
    Still, most traders and analysts expected the central bank
to reduce the benchmark Selic rate by 50 basis points on Jan. 11
after twice cutting it by a moderate 25 basis points despite the
country's deepest recession in decades.
    Yields on rate futures indicated a three-in-four chance of a
50-basis-point cut and one-in-four odds of a sharper reduction.
    The Brazilian real strengthened 0.5 percent, but most
Latin American currencies were slightly weaker.
    Concerns that U.S. President-elect Donald Trump's expected
policies of heavy spending and lower taxes could force the
Federal Reserve to boost U.S. rates faster has weighed on demand
for emerging assets recently.
    
    Key Latin American stock indexes and currencies at 1500 GMT:
 Stock indexes                                 daily %   YTD %
                                    Latest      change  change
 MSCI Emerging Markets                 879.77    -0.15    2.18
 MSCI LatAm                           2391.84     0.39    1.79
 Brazil Bovespa                      62008.74     0.56    2.96
 Mexico IPC                          45756.77    -0.68    0.25
 Chile IPSA                           4170.04    -0.03    0.45
 Chile IGPA                          20812.95    -0.03    0.38
 Argentina MerVal                    18356.99     0.39    8.51
 Colombia IGBC                       10276.37     -0.4    1.46
 Venezuela IBC                       32457.08    -0.47    2.37
                                                              
 Currencies                                    daily %   YTD %
                                                change  change
                                       Latest           
 Brazil real                           3.2025     0.58    1.46
 Mexico peso                          21.2800    -0.29   -2.52
                                                        
 Chile peso                             669.4    -0.28    0.19
 Colombia peso                           2928    -0.03    2.51
 Peru sol                               3.381    -0.12    0.98
 Argentina peso (interbank)           15.7800     0.25    0.60
                                                        
 Argentina peso (parallel)              16.77     0.54    0.30
                                                        
 

 (Reporting by Bruno Federowski; Editing by Jeffrey Benkoe)

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