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Swap Rates Indicating Underlying Uncertainty

BRAZIL
  • President Bolsonaro has agreed to reject part of the budget proposal to make room for mandatory spending that was purposely underestimated by lawmakers. But the vetoes will hardly amount to what Guedes is pushing for, according to four people with knowledge of the matter who requested anonymity because the discussions aren't public. (BBG)
  • The Brazilian Real appeared to take the lead from regional counterparts and enjoyed a strong rally yesterday with USDBRL closing back below 5.60. Confirmation of the partial veto saw a quick surge in the local currency. However, local swap rates did not echo this optimism and diverged from LatAm neighbours shifting higher by around 10-13 bps.

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