EMERGING MARKETS-Yields on Brazil rate futures jump as central bank stands pat
By Bruno Federowski SAO PAULO, July 21 (Reuters) - Yields paid on short-term interest rate future contracts in Brazil rose sharply on Thursday as traders increased bets that the country's central bank will wait until at least October to loosen policy. The bank kept rates untouched at a nearly 10-year high of 14.25 percent on Wednesday, announcing the decision in a statement longer than the two-paragraph document investors grew used to. At the end of the first policy meeting chaired by new governor Ilan Goldfajn, the central bank said its 2017 inflation forecast dropped to its target of around 4.5 percent. But it also warned of lingering risks to reaching that goal, such as a recent uptick in inflation due to rising food prices. Annual inflation rose faster than expected in mid-July, official data showed on Thursday. Economists with UBS pushed their forecasts for an interest rate cut back to October from August following the central bank statement. The statement "indicated that although the monetary authority recognizes the progress made in fighting inflation, its base case and the balance of risks to inflation do not allow for monetary easing at this point," UBS wrote in a client note. Prices of interest rates future contracts indicated traders were betting on a 25 basis-point cut in Brazil's benchmark rate in October, compared to a 50 basis-point reduction the previous day, traders said. Other financial markets in the region were mixed. Brazil's Bovespa stock index seesawed as a rise in shares of miners and steelmakers outweighed weakness in the financial sector. Shares of real estate company JHSF Participações SA , which are not part of the index, soared 20 percent, their biggest daily gain in six years. A local newspaper reported on Thursday Blackstone Group LP , the world's largest alternative asset manager, has started talks to acquire a 50 percent stake in JHSF's shopping mall portfolio, which is valued at over 2 billion reais ($614 million). Most Latin American currencies were slightly stronger as investors digested comments by the European Central Bank that left the door open to more policy stimulus. Key Latin American stock indexes and currencies at 1505 GMT: Stock indexes daily YTD % Latest % change change MSCI Emerging Markets 871.11 0.04 9.65 MSCI LatAm 2395.48 -0.18 31.15 Brazil Bovespa 56690.55 0.2 30.77 Mexico IPC 47549.41 0.09 10.64 Chile IPSA 4104.23 -0.11 11.52 Chile IGPA 20255.89 -0.09 11.59 Argentina MerVal 16014.91 0.52 37.17 Colombia IGBC 9904.82 -0.26 15.88 Currencies daily YTD % % change Latest change Brazil real 3.2545 -0.21 21.28 Mexico peso 18.5675 0.61 -7.20 Chile peso 648.5 0.34 9.44 Colombia peso 2927.4 -0.08 8.26 Peru sol 3.321 -0.30 2.80 Argentina peso (interbank) 15.0600 0.13 -13.79 Argentina peso (parallel) 15.25 0.79 -6.43 (Reporting by Bruno Federowski; Editing by Meredith Mazzilli)
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