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DI Swaps Curve More Inverted, Banks Raise Terminal Rate Estimates

BRAZIL
  • DI Curve inverts more following the 150bps hike and continued hawkish guidance.
  • Earlier reports from UBS that they have raised Brazil Terminal Rate estimate to 12% from 11.50% at UBS BB.
  • Additionally, in light of the continued inflation pressure in the near term, SocGen now predict the BCB raising its policy rate to 11.75% in Q1 2022 before hitting the pause button for about two quarters and then cutting rates by at least 100bp in Q4 2022 to 10.75%.
  • SocGen’s earlier terminal rates forecast was 11.25% in May 2022, with an expectation for the easing cycle only beginning in 2023.
  • DI Swaps:
    • Jan '23 +30 bps at 11.67%
    • Jan '26 +6 bps at 10.65%
    • Jan '31 -4 bps at 10.75%

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