March 10, 2017 / 10:31 PM / a year ago

EMERGING MARKETS-Brazil rate futures fall on bets of steeper rate cut

 (Updates with final prices)
    By Bruno Federowski
    SAO PAULO, March 10 (Reuters) - Yields on Brazilian interest
rate futures fell sharply on Friday as slower-than-expected
inflation data fueled bets that the central bank will increase
the magnitude of interest rate cuts next month. 
    Brazil's official inflation index rose at its tamest pace
since 2010 in the 12 months through February, below expectations
of all 24 economists polled by Reuters.
    Rate future yields indicated an 80 percent
probability Brazil's central bank would cut rates by 100 basis
points at its monetary policy meeting in April, traders said,
with a 20 percent likelihood of a 75 basis point cut.
    The central bank has said the size of the rate cut will
hinge on inflation expectations and economic data.
It cut the benchmark Selic overnight lending rate by 75 bps each
in January and February. The rate is currently at 12.25 percent.
    The prospect of lower rates also supported Brazil's
benchmark Bovespa stock index, which rose 0.14 percent.
    The Brazilian real strengthened 1.6 percent, leading
gains among Latin American currencies, after it slipped over 2
percent in the first four days of the week, its sharpest
four-session percentage drop in three months.
    Strong U.S. jobs figures consolidated expectations the U.S.
Federal Reserve will raise interest rates next week. While that
could reduce the allure of high-yielding emerging market assets,
traders said markets had anticipated the result.
    Mexico's IPC stock index fell, dragged down by a 2.5 percent
drop in shares in Carlos Slim's America Movil, which had already
slipped more than 4.5 percent on Thursday after the telecoms
giant revealed it was facing tougher antitrust regulation.
    Key Latin American stock indexes and currencies at 2215 GMT:
 Stock indexes                Latest       Daily   YTD pct
                                             pct    change
 MSCI Emerging Markets           926.14     0.35      7.41
 MSCI LatAm                    2,540.59     0.72      8.54
 Brazil Bovespa               64,675.46     0.14      7.39
 Mexico IPC                   47,102.31    -0.34      3.20
 Chile IPSA                    4,474.88     0.15      7.79
 Chile IGPA                   22,487.72     0.17      8.46
 Argentina MerVal             18,895.91     0.58     11.69
 Colombia IGBC                 9,926.64     0.47     -1.99
 Venezuela IBC                38,545.32    -1.02     21.57
 Currencies                      Latest    Daily   YTD pct
                                             pct    change
 Brazil real                     3.1435     1.60      3.36
 Mexico peso                     19.600     1.16      5.84
 Chile peso                       663.8     0.18      1.04
 Colombia peso                  2,984.5     0.37      0.57
 Peru sol                         3.283     0.21      3.99
 Argentina peso (interbank)     15.4700     0.45      2.62
 Argentina peso (parallel)        15.99    -0.12      5.19
 (Reporting by Bruno Federowski; Editing by Alistair Bell)
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