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DI Swaps Curve Shifts Lower After Soft GDP Data

BRAZIL
EM BulletStoryEmerging Market News
  • DI swap rates are outperforming today, with yields falling by over 20bp in the belly and long-end after Q4 GDP data came in below expectations. The move leaves longer-end yields around 45bp lower over the last week, as the market prices in a slowdown in the Selic hiking pace after the Copom meeting later this month, when another 100bp move is expected.
    • The smaller-than-expected 0.2% q/q increase in Q4 GDP, reflected a decline in household consumption over the quarter and more modest 0.4% increase in investment, amid signs that high interest rates are starting to weigh on growth.
    • Full-year GDP growth came in at 3.4%, with analysts expecting growth to slow to 2.0% this year, according to the latest BCB Focus survey.
    • Amid declining popularity on the back of slowing growth and high inflation, the government has announced measures this week to contain food prices and boost the economy. Yesterday, the government said it plans to use a social fund that receives oil and gas exploration royalties to support growth, with a committee installed to manage the $3.5bn in the fund.
    • On the data front, February trade data are due at 1800GMT today, before attention turns to Feb IPCA inflation and latest IP and retail sales figures next week.
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  • DI swap rates are outperforming today, with yields falling by over 20bp in the belly and long-end after Q4 GDP data came in below expectations. The move leaves longer-end yields around 45bp lower over the last week, as the market prices in a slowdown in the Selic hiking pace after the Copom meeting later this month, when another 100bp move is expected.
    • The smaller-than-expected 0.2% q/q increase in Q4 GDP, reflected a decline in household consumption over the quarter and more modest 0.4% increase in investment, amid signs that high interest rates are starting to weigh on growth.
    • Full-year GDP growth came in at 3.4%, with analysts expecting growth to slow to 2.0% this year, according to the latest BCB Focus survey.
    • Amid declining popularity on the back of slowing growth and high inflation, the government has announced measures this week to contain food prices and boost the economy. Yesterday, the government said it plans to use a social fund that receives oil and gas exploration royalties to support growth, with a committee installed to manage the $3.5bn in the fund.
    • On the data front, February trade data are due at 1800GMT today, before attention turns to Feb IPCA inflation and latest IP and retail sales figures next week.