June 9, 2017 / 5:18 PM / a year ago

EMERGING MARKETS-Brazil rate futures slip as inflation dips to 10-year low

    By Bruno Federowski
    SAO PAULO, June 9 (Reuters) - Yields paid on Brazilian
interest-rate future contracts slipped on Friday after annual
inflation dipped to a 10-year low, spurring bets that the
central bank would likely cut rates sharply next month.

    Rate-future yields reflected the perception of a nearly 90
percent probability that the bank would lower the benchmark
Selic rate by 75 basis points to 9.5 percent at its July
monetary policy meeting.
    Many investors unwound bets on a lesser 50-basis point
reduction, an outlook that had gained traction after the central
bank said last month it could reduce the pace of interest rate
cuts due to growing political uncertainty. The bank cut rates by
100 bps in May.
    In foreign exchange and stock markets, Brazilian traders
were monitoring the deliberations of the country's top electoral
court in a case that could unseat President Michel Temer if
judges rule he used illegal campaign funding in 2014.

    Even though the court seemed poised to toss out the case,
the president faces a separate corruption investigation, stoking
investor caution as Brazil's stocks and currency
    Shares of meatpacker JBS SA were among the
biggest decliners after federal police raided offices of the
company to investigate the alleged use of insider information in
financial market dealings between April and May.
    Trading was subdued in other Latin American markets, with
caution warranted following weaker Chinese factory gate prices
that again cast doubts on economic growth. China is a major
export market for the region.
    There appeared to be little discernible impact on emerging
markets from the British election. However, Rabobank advised
positioning for central European currencies to firm against the
weaker pound.
    Key Latin American stock indexes and currencies at 1620 GMT:
 Stock indexes                                daily %    YTD %
                                               change   change
 MSCI Emerging Markets               1020.40     0.13    18.18
 MSCI LatAm                          2550.26     0.26     8.67
 Brazil Bovespa                     62697.11    -0.09     4.10
 Mexico IPC                         49161.20     0.15     7.71
 Chile IPSA                          4849.79     -0.2    16.82
 Chile IGPA                         24308.60    -0.22    17.24
 Argentina MerVal                   21747.19    -0.82    28.55
 Colombia IGBC                      10728.53    -0.19     5.93
 Venezuela IBC                      92496.01     0.18   191.74
 Currencies                                   daily %    YTD %
                                               change   change
 Brazil real                          3.2765    -0.39    -0.83
 Mexico peso                         18.1820     0.04    14.09
 Chile peso                           663.75     0.17     1.05
 Colombia peso                          2919    -0.01     2.83
 Peru sol                              3.269     0.00     4.44
 Argentina peso (interbank)          15.9000     0.31    -0.16
 Argentina peso (parallel)              16.3     0.25     3.19

 (Reporting by Bruno Federowski; Editing by W Simon)
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