June 16, 2017 / 5:54 PM / a year ago

EMERGING MARKETS-Brazil rate futures yields fall on policy easing bets

    By Bruno Federowski
    SAO PAULO, June 16 (Reuters) - Yields on Brazilian interest
rate future contracts fell on Friday after economic activity
expanded slightly below expectations in April, supporting bets
that the central bank will next month slash rates by 75 basis
    The so-called IBC-Br index rose 0.28 percent from March
after seasonal adjustments, compared to the median 0.30 percent
analyst estimate.
    The release added to a batch of data pointing to a slow
economic recovery from Brazil's deepest recession in decades,
which could allow the central bank to pursue a rapid pace of
policy easing.
    Rate futures yields indicated nearly consensual expectations
of a 75-basis-point cut in the benchmark Selic rate, with a
small probability of a steeper 100-basis-point reduction.

    The move came as a reversal from the recent spike in rate
future yields, erasing bets that the central bank could pursue a
slower 50-basis-point pace of reductions as a political crisis
threatened to delay President Michel Temer's reform agenda.
    Trading volumes were thin, however, as many investors
remained away from their desks between a local holiday and the
weekend. The Brazilian real slipped 0.2 percent, while
the benchmark Bovespa stock index fell 0.8 percent.
    Shares of meatpacker JBS SA dropped 1.5 percent
after a source denied that Abu Dhabi sovereign wealth fund
Mubadala Development Co PJSC was arranging partners to make a
bid for control of the world's largest meatpacker.
    The Mexican peso strengthened 0.6 percent, tracking
an increase in crude prices. Also supporting demand for emerging
market assets were weaker-than-expected U.S. home start figures,
which cast a shadow on expectations of two further U.S. rate
hikes this year.
    Mexico's S&P/BMV IPC index dipped 0.2 percent,
dragged lower by shares of industrial conglomerate Alfa
    Key Latin American stock indexes and currencies at 1730 GMT:
 Stock indexes                Latest        Daily  YTD pct
                                              pct   change
 MSCI Emerging Markets          1,002.70    -0.09     16.4
 MSCI LatAm                     2,526.43    -0.34      8.3
 Brazil Bovespa                61,431.10    -0.79     2.00
 Mexico S&P/BMV IPC            49,049.96    -0.18     7.46
 Chile IPSA                     4,845.52    -0.09    16.72
 Chile IGPA                    24,254.38    -0.09    16.98
 Argentina MerVal              21,164.80     0.73    25.10
 Colombia IGBC                 10,828.00     0.24     6.91
 Venezuela IBC                118,905.77     1.48   275.04
 Currencies                       Latest    Daily  YTD pct
                                              pct   change
 Brazil real                      3.2870    -0.22    -1.15
 Mexico peso                     17.9230     0.62    15.74
 Chile peso                        664.2     0.22     0.98
 Colombia peso                   2974.52    -0.75     0.91
 Peru sol                          3.275     0.06     4.24
 Argentina peso (interbank)      16.0400    -0.37    -1.03
 Argentina peso (parallel)         16.48     0.06     2.06
 (Reporting by Bruno Federowski, editing by G Crosse)
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