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BRAZIL

Q3 GDP Due, Senate Vote On Precatorios Bill

BONDS

EGB/Gilt: EGBs Edge Higher

EMERGING MARKETS

Rising Inflation Pushes Poland 10Y Real Yield To New Lows

US 10YR FUTURE TECHS

(H2)‌‌ Watching Resistance

OPTIONS

Expiries for Dec02 NY cut 1000ET (Source DTCC)

US TSYS

Flattening Continues

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  • Citi Economics updated its policy expectations for Wednesday's BCB meeting (October 27), calling for a 150bp increase in the Selic rate vs 100bp prior expectation.
  • Economists point to the ongoing congressional negotiations around fiscal policy easing amid a more challenging global outlook as sources for an accelerated policy rate decision from Copom this week.
  • The easier fiscal policy suggests that inflation should stay above target until 2022 year-end, and combined with the government's recent decision to make room for additional public spending of around BRL90billion (0.9% of GDP), inflationary pressures are likely to rise further and reign for longer than expected.
  • This brings their economists in line with their trader's expectations for the BCB this week. The trading desk notes that a relatively modest hike (100-125bps) should be seen as dovish and ought to worsen the vicious cycle of weaker currency/steeper rates/damaged sentiment.