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LATAM FX: BNP Paribas Recommends Long BRL/COP And DI Swaps Rates Flattener

LATAM FX
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  • The anticipated tightening cycle in Brazil, which is expected to start tomorrow with a 25bp Selic rate hike to 10.75%, will help BRL to outperform its peers, according to BNP Paribas. They recommend going long BRL/COP, which will benefit from both rate hikes in Brazil and continued cuts in Colombia.
  • Latest central bank surveys show that analysts expect the Selic rate to rise to 11.25% by year-end in Brazil, while in Colombia, BanRep is expected to cut its policy rate by 200bp to 8.75% by the end of the year, with a risk of a 75bp move later this month.
  • BNP Paribas also believes that the tightening cycle will flatten the local DI swap rates curve in Brazil and recommends a Jan 26s29s DI flattener.
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  • The anticipated tightening cycle in Brazil, which is expected to start tomorrow with a 25bp Selic rate hike to 10.75%, will help BRL to outperform its peers, according to BNP Paribas. They recommend going long BRL/COP, which will benefit from both rate hikes in Brazil and continued cuts in Colombia.
  • Latest central bank surveys show that analysts expect the Selic rate to rise to 11.25% by year-end in Brazil, while in Colombia, BanRep is expected to cut its policy rate by 200bp to 8.75% by the end of the year, with a risk of a 75bp move later this month.
  • BNP Paribas also believes that the tightening cycle will flatten the local DI swap rates curve in Brazil and recommends a Jan 26s29s DI flattener.