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Marginally Dovish Language Steepens DI Curve

BRAZIL
  • USDBRL led higher from the open with the Real the notable underperformer in the region (-0.9%). Analysts have noted some potential dovish language from the minutes, citing the phrase "imply projections considerably below the inflation target at the relevant horizon." This potentially shows how high the bar may be for the Copom to depart from their 'partial normalisation'.
  • The swaps curve would agree with this analysis. Front end swap rates are seen lower with the potential expectation of less aggressive short-term tightening, however the belly and long end have shifted higher in line with the currency weakness. Focus turns to Economic Activity data due Thursday.
  • USDBRL up 0.77% at 5.2685
  • BRLMXN down 1% at 3.774
  • Brazil DI Swaps:
    • 1-yr -4 bps at 4.8%
    • 2-yr -4 bps at 6.61%
    • 5-yr +6 bps at 8.51%
    • 10-yr +9 bps at 9.27%

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