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Local Assets Retreat Over Fiscal Concerns

BRAZIL
  • Concerns surrounding the fiscal outlook in Brazil have increased following the Government’s announcement of their plan to lower fuel prices.
    • “Our sole fiscal anchor is the spending cap rule, which had already been losing credibility,” said the chief strategist at Renascenca brokerage in Sao Paulo. “And it may be bypassed again by an opportunistic measure.”
  • USDBRL rose from around 4.80 to 4.87 on Tuesday, pulling back somewhat from the intra-day highs of 4.93. In similar vein, swap rates rose, with the belly and the long-end of the DI curve shifting roughly 20 basis points higher.
  • Senator Fernando Bezerra plans to present report on ICMS bill changes at 4:30pm local time today. Texts can be read on the Senate floor on June 9, according to Bezerra.
  • Separately, senate head Pacheco met with state governors on Tuesday and will do so again today to discuss the ICMS report.

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