January 9, 2017 / 11:51 PM / 7 months ago

EMERGING MARKETS-Brazil rate futures slip on bets on sharp rate cut

(Adds index prices, Mexican effort to stabilize prices)
    SAO PAULO, Jan 9 (Reuters) - Yields on Brazilian interest
rate futures narrowed on Monday as traders increased bets that
the central bank would cut rates by an aggressive 75 basis
points this week.
    Expectations of a sharp rate cut grew after several
indicators showed inflation slowing faster than expected amid
few signs of an economic pickup. 
    Managers at Verde Asset Management SA, which runs Brazil's
largest hedge fund, said on Friday they had purchased fixed-rate
bonds on hopes of a 75-basis-point reduction. 
    Still, most traders and analysts expected the central bank
to reduce the benchmark Selic rate by 50 basis points on Jan. 11
after twice cutting it by a moderate 25 basis points despite
Brazil's deepest recession in decades.
    Yields on rate futures indicated a three-in-four chance of a
50-basis-point cut and one-in-four odds of a sharper reduction.
    The Brazilian real strengthened 0.8 percent, but most
Latin American currencies were slightly weaker.
    In Mexico, officials vowed to keep a lid on prices as part
of an economic plan set out on Monday to dampen widespread
outrage over a major fuel price hike, though it failed to win
universal backing among business groups.
    Under proposals announced by President Enrique Pena Nieto,
business, government and union leaders pledged to keep the price
of staple goods stable, cut salaries of senior government
officials by 10 percent and encourage capital repatriation.
 
    Mexico's IPC stock exchange weakened 1.12 percent at the
close of trading on Monday.
    Concerns that U.S. President-elect Donald Trump's expected
policies of heavy spending and lower taxes could force the
Federal Reserve to boost U.S. rates faster has weighed on demand
for emerging assets.
    
    Key Latin American stock indexes and currencies at 2300 GMT:
    
 Stock indexes          Latest      Daily pct    YTD pct
                                       change     change
 MSCI Emerging Markets      878.44       -0.3       1.88
                                               
 MSCI LatAm               2,382.50          0       1.79
                                               
 Brazil Bovespa          61,700.29       0.06       2.45
                                               
 Mexico IPC              45,553.51      -1.12      -0.20
                                               
 Chile IPSA               4,161.51      -0.23       0.24
                                               
 Chile IGPA              20,774.78      -0.21       0.20
                                               
 Argentina MerVal        18,509.93       1.23       9.41
                                               
 Colombia IGBC           10,276.37       -0.4       1.46
                                               
 Venezuela IBC           32,457.08      -0.47       2.37
                                               
                                                        
 Currencies                 Latest  Daily pct    YTD pct
                                       change     change
 Brazil real                3.1961       0.80       1.66
 Mexico peso                21.376      -0.74      -2.96
 Chile peso                    671      -0.52      -0.05
 Colombia peso            2,924.32       0.09       2.64
 Peru sol                    3.384      -0.21      -0.86
 Argentina peso            15.8850      -0.60      -0.06
 (interbank)                                   
                                               
 Argentina peso              16.83      -0.12      -0.06
 (parallel)                                    
 


 (Reporting by Bruno Federowski; Editing by Jeffrey Benkoe and
Grant McCool)

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