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Pullback Considered Corrective


Holding Above Recent Lows


BLOCK, Large 3Y Midcurve Put Condor

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BCB Governor Campos Neto Comments:

  • Brazil recovery at avg of emerging countries
  • Brazil has never faced so many inflationary shocks
  • Brazil to take Selic rate to wherever needed
  • We won't alter plans every time of high CPI data
  • There's inertia to brazil inflation expectations
  • We'll do what it takes to meet inflation target
  • Brazil fiscal backdrop is 'not bad'
  • Brazil inflation affected by weather issues
  • Brazil needs to `turn the page' of fiscal spending
  • Says many dollars haven't returned to Brazil (All BBG)
  • Swap rates have fallen with particular relief seen in the front-end of the DI curve as some analysts highlight the mention to not altering course may make 100 bps the most likely outcome at the September 22 meeting. The mention to taking the Selic rate to wherever needed explains the bull steepening move with 10-year swap rates little changed.
  • Brazil DI Swaps:
    • Jan '22 -24bps at 7.06%
    • Jan '23 -17 bps at 8.98%
    • Jan '26 -2 bps at 10.28%
    • Jan '31 -2 bps at 10.85%