EMERGING MARKETS-Brazil local yield curve steepens as short tightening cycle seen

jueves 11 de diciembre de 2014 09:39 GYT

By Walter Brandimarte
    RIO DE JANEIRO, Dec 11 (Reuters) - Yields paid on
short-dated Brazilian interest-rate contracts dropped on
Thursday after the central bank signaled its current monetary
tightening cycle may be shorter than expected.
    Yields paid on long-dated contracts rose, causing the local
yield curve to steepen, as a milder monetary tightening campaign
was seen as insufficient to bring inflation back to target,
demanding higher interest rates in the future.
    Bets on a less aggressive interest-rate campaign increased
after the central bank said in minutes of its latest monetary
policy meeting that future rate hikes should be done
"sparingly." It also forecast inflation to enter "a long period
of decline" at some point next year. 
    "Today's minutes included many signs that the ongoing
monetary tightening will not last much longer," BBVA economist
Enestor dos Santos said in a research note.
    He forecast the central bank will stop raising rates in the
first quarter of 2015 but considered it "unlikely" that
inflation will converge to the 4.5 percent government target by
2016, as estimated by Brazilian policymakers.
    Yields paid on interest-rate contracts due in January 2016
 dropped 3 basis points, while those paid on contracts
maturing in January 2021 rose 15 basis points.
    Meanwhile the Brazilian real lost 0.4 percent to 2.62
per dollar, near a 9-1/2-year low, on uncertainty about the
future of the central bank's currency intervention program.
    Central bank chief Alexandre Tombini has said the bank will
make a decision by the end of the year on the future of the
program, which supports the real by providing investors with
currency hedge through the sale of forex swaps.
    Elsewhere in Latin America, the currencies of Mexico 
and Chile gained 0.3 percent and 0.1 percent,
respectively, as oil and commodity prices halted their recent
slide, supporting investors' appetite for risk. 
    Key Latin American stock indexes and currencies at 1320 GMT:
 Stock indexes                   daily %    YTD %
                                  change   change
 MSCI Emerging           949.07       -1    -4.39
 MSCI LatAm             2701.49    -0.47    -15.2
 Brazil Bovespa         49478.6    -0.14    -3.94
 Chile IPSA             3851.45    -0.21     4.12
 Chile IGPA            18892.27    -0.18     3.65
 Colombia IGBC         11091.05        0   -15.15
 Currencies                      daily %    YTD %
                                  change   change
 Brazil real             2.6210    -0.40   -10.08
 Mexico peso             14.533     0.25   -10.34
 Chile peso                 615     0.12   -14.46
 Colombia peso          2406.99    -0.44   -19.73
 Peru sol                 2.966     0.00    -5.83
 Argentina peso          8.5500     0.03   -24.06
 Argentina peso           12.73     0.55   -21.45
 (Editing by Nick Zieminski)