June 23, 2017 / 4:10 PM / a year ago

EMERGING MARKETS-Mexico rate futures down on central bank hint

    By Bruno Federowski
    SAO PAULO, June 23 (Reuters) - Yields paid on Mexican
interest-rate future contracts fell on Friday after the central
bank signaled it would not increase borrowing costs any longer.
    In an unexpectedly divided decision, Banco de México raised
its benchmark rate by a notch to 7 percent, as forecast by all
17 analysts surveyed by Reuters last week. One member voted to
hold rates.
    In its policy statement, the bank said "the reference rate
has reached a level that is consistent with the process of
efficient convergence of inflation to the 3 percent target,"
hinting that further increases are no longer necessary.
    "Now the debate on the timing of potential rate cuts is set
to heat up," economists at Morgan Stanley wrote in a report.
    "We still see talk of policy easing as premature. While
there is merit in arguments that real rates may be already quite
high, Mexico is still not out of the inflation woods."
    Rate-future prices indicated a nearly 100 percent
probability that the central bank will keep its reference rate
at 7 percent in its August meeting, with a cut coming only in
    Despite fading expectations of further policy tightening,
the Mexican peso strengthened 0.9 percent, tracking an
increase in crude prices. Oil-heavy Colombia's peso
firmed 0.6 percent.
    The Brazilian real and the country's benchmark
Bovespa stock index seesawed as lingering political
concerns kept up volatility. 
    Shares of power utility Centrais Elétricas Brasileiras SA
 were the biggest decliners on the index as traders
booked gains from a 6.4 percent rally on Thursday triggered by
optimism over its restructuring plans.
    Meatpackers JBS SA and Marfrig also
fell after the United States decided late on Thursday to suspend
imports of Brazilian fresh beef for sanitary concerns. Shares of
rival Minerva SA, which will export to the United
States from Uruguay instead of Brazil, rose 0.7 percent.
    Latin American stock indexes and currencies at 1600 GMT:
 Stock indexes                                 daily %   YTD %
                                      Latest    change  change
 MSCI Emerging Markets                1013.10     0.43   16.99
 MSCI LatAm                           2502.75     0.72    6.16
 Brazil Bovespa                      61384.37     0.18    1.92
 Mexico S&P/BVM IPC                  49089.12     0.15    7.55
 Chile IPSA                           4786.82     0.63   15.31
 Chile IGPA                          23970.55     0.56   15.61
 Argentina MerVal                    20949.40    -0.22   23.83
 Colombia IGBC                       10620.48     -0.2    4.86
 Venezuela IBC                      120519.88    -0.25  280.13
 Currencies                                    daily %   YTD %
                                                change  change
 Brazil real                           3.3297     0.16   -2.42
 Mexico peso                          17.9650     0.86   15.47
 Chile peso                            659.85     0.57    1.64
 Colombia peso                         3003.6     0.63   -0.07
 Peru sol                               3.254     0.18    4.92
 Argentina peso (interbank)           16.1200     0.25   -1.52
 Argentina peso (parallel)               16.5     0.18    1.94
 (Reporting by Bruno Federowski; editing by Grant McCool)
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