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BRAZIL: DI Swap Rates Decline As Selic Rate Hike Expectations Pared

BRAZIL
BulletEM BulletEmerging Market News
  • DI swap rates are rallying notably today, with yields down by over 30bp around the 1-2Y segment, as the market pares Selic rate hike expectations, following yesterday’s Copom meeting. At that meeting, the Copom maintained its guidance for another 100bp hike in March, but kept its guidance beyond March open-ended and data dependent. See the MNI review of the meeting, with analyst views here.
    • Many analysts see the Selic rate rising to a terminal rate in a 15-15.5% range, below market pricing of above 16% before the announcement.
    • Speaking earlier, President Lula said he has 100% confidence in the work of BCB Governor Galipolo and believed he will deliver the conditions to deliver a lower interest rate, as long as policy allows him to do so.
    • Meanwhile, USDBRL has pulled back 1.0% after opening sharply higher today, leaving the pair marginally higher on the day. Yesterday’s lows come in just above the 5.84 handle, which remains an important pivotal support area for the pair. Below here, 5.80 and 5.6340 remain significant areas of support.
    • Datawise, focus turns to central government budget figures, due at 1730GMT(1230ET), where a BRL 20.5bn surplus is expected in December.
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  • DI swap rates are rallying notably today, with yields down by over 30bp around the 1-2Y segment, as the market pares Selic rate hike expectations, following yesterday’s Copom meeting. At that meeting, the Copom maintained its guidance for another 100bp hike in March, but kept its guidance beyond March open-ended and data dependent. See the MNI review of the meeting, with analyst views here.
    • Many analysts see the Selic rate rising to a terminal rate in a 15-15.5% range, below market pricing of above 16% before the announcement.
    • Speaking earlier, President Lula said he has 100% confidence in the work of BCB Governor Galipolo and believed he will deliver the conditions to deliver a lower interest rate, as long as policy allows him to do so.
    • Meanwhile, USDBRL has pulled back 1.0% after opening sharply higher today, leaving the pair marginally higher on the day. Yesterday’s lows come in just above the 5.84 handle, which remains an important pivotal support area for the pair. Below here, 5.80 and 5.6340 remain significant areas of support.
    • Datawise, focus turns to central government budget figures, due at 1730GMT(1230ET), where a BRL 20.5bn surplus is expected in December.