June 22, 2017 / 3:44 PM / a year ago

EMERGING MARKETS-Short-term Brazil rate futures slip after central bank report

    By Bruno Federowski
    SAO PAULO, June 22 (Reuters) - Yields paid on Brazilian
short-term interest rate future contracts slipped on Thursday as
traders slightly increased bets on a steep rate cut after the
central bank cut its forecasts for inflation.
    In a quarterly report, the bank lowered its inflation
outlook to 3.8 percent from 4.0 percent for 2017 and to 4.5
percent from 4.6 percent for 2018.
    But it reiterated that the next policy decisions still
depend on incoming economic data, signaling it was unsure
whether to slow monetary easing from the brisk 100 basis-point
current pace of rate cuts.
    Rate-future yield prices showed an increased likelihood that
the central bank will lower the benchmark Selic rate by 100
basis points to 9.25 percent next month, although a majority of
traders still bet on a slower 75-basis-point reduction.

    Concerns that a mounting political crisis could delay the
implementation of structural reforms have led the central bank
to adopt a cautious stand.
    Those concerns helped to keep the Brazilian real
flat, while most other Latin American currencies strengthened on
the back of rising prices of crude and other commodities.
    Brazil's benchmark Bovespa stock index rose 0.8
percent, supported by shares of iron ore miner Vale SA
and state-controlled oil company Petróleo Brasileiro SA
    Shares of Cia Energética de Minas Gerais,
Brazil's No. 3 power utility, led the gains after it
kick-started the sale of its controlling stake in Light SA
 to cut debt. Shares of Light, which are not part of
the Bovespa index, soared more than 25 percent, its biggest
daily gain in more than two decades.
    Argentina's Merval stock index rose 1.8 percent,
rebounding from its biggest daily loss in a year and a half
following a decision by MSCI not to include the country in its
emerging market index.
    Key Latin American stock indexes and currencies at 1520 GMT:
 Stock indexes                               daily %    YTD %
                                              change   change
 MSCI Emerging Markets              1009.29     0.28    16.72
 MSCI LatAm                         2487.63      0.3     5.96
 Brazil Bovespa                    61229.01     0.77     1.66
 Mexico S&P/BVM IPC                48917.23    -0.14     7.17
 Chile IPSA                         4751.31    -0.02    14.45
 Chile IGPA                        23818.16        0    14.87
 Argentina MerVal                  20980.24     1.77    24.01
 Colombia IGBC                     10656.78    -0.08     5.22
 Venezuela IBC                     120957.1    -0.38   281.51
 Currencies                                  daily %    YTD %
                                              change   change
 Brazil real                         3.3325    -0.02    -2.50
 Mexico peso                        18.1180     0.63    14.49
 Chile peso                          663.16     0.31     1.14
 Colombia peso                       3032.4     0.82    -1.02
 Peru sol                             3.267     0.12     4.50
 Argentina peso (interbank)         16.2000     0.22    -2.01
 Argentina peso (parallel)            16.58     0.72     1.45

 (Reporting by Bruno Federowski; Editing by Lisa Von Ahn)
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