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BRAZIL: Terminal Selic Rate Pricing Falls Back Towards 15.5%

BRAZIL
BulletEM BulletEmerging Market News
  • After a soft open, and despite the broad dollar strength today, the Brazilian real is now moderately outperforming, with USDBRL ~0.35% lower on the session, below 6.16. Local newsflow has been very light today, but the move follows further BCB intervention earlier this week, which took the central bank’s total intervention in the spot market to almost $22bn in recent weeks, with another $11bn in FX repo lines.
  • DI swap rates are also notably outperforming today, with yields down as much as 40bp in the belly and long-end of the curve, bringing terminal Selic rate pricing back towards 15.5%. Despite the move, swap rates remain as much as 150bp higher over the last month, amid the acceleration of the BCB’s hiking cycle, which is likely to see another 100bp Selic rate hike at the next Copom meeting on Jan 29.
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  • After a soft open, and despite the broad dollar strength today, the Brazilian real is now moderately outperforming, with USDBRL ~0.35% lower on the session, below 6.16. Local newsflow has been very light today, but the move follows further BCB intervention earlier this week, which took the central bank’s total intervention in the spot market to almost $22bn in recent weeks, with another $11bn in FX repo lines.
  • DI swap rates are also notably outperforming today, with yields down as much as 40bp in the belly and long-end of the curve, bringing terminal Selic rate pricing back towards 15.5%. Despite the move, swap rates remain as much as 150bp higher over the last month, amid the acceleration of the BCB’s hiking cycle, which is likely to see another 100bp Selic rate hike at the next Copom meeting on Jan 29.