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EMERGING MARKETS-Yields on Brazil rate futures rise on bets of slower rate cuts
June 1, 2017 / 3:25 PM / in 3 months

EMERGING MARKETS-Yields on Brazil rate futures rise on bets of slower rate cuts

    By Bruno Federowski
    SAO PAULO, June 1 (Reuters) - Yields paid on Brazilian
interest rate futures rose on Thursday after the central bank
said it was ready to reduce the pace of rate cuts amid a growing
political crisis.
    Corruption allegations against President Michel Temer which
could cost him his mandate have threatened to derail his agenda
of structural reforms, which fueled bets on a rapid rate of
policy easing.
    In a statement announcing a widely expected 100 basis-point
cut in the benchmark Selic rate after the market close on
Wednesday, the bank said a "moderate reduction" in the pace of
rate cuts would likely be appropriate at its July meeting.

    Rate-future prices indicated a 20 percent chance of a lower
75 basis-point cut next month, traders said, with an 80 percent
probability of a 100 basis-point reduction. Before the
statement, investors had speculated the bank could even
accelerate rate cuts in July to a brisk 125 basis-point pace.
    Most Latin American currencies strengthened for a second
day, though gains were limited by growing expectations of a U.S.
rate hike this month following stronger-than-expected jobs data.
 Higher U.S. rates could dampen the appeal of
high-yielding emerging market assets, weighing on the value of
their currencies.
    The Mexican peso and the Brazilian real both
strengthened around 0.2 percent. 
    A Reuters poll showed on Thursday that the Brazilian
currency is likely to weaken only slightly over the next year
despite a deepening political crisis, a sign of sustained market
confidence in the country as it finally emerges from its
worst-ever recession.
    Latin America's No. 1 economy expanded in the first quarter
at the fastest rate since 2013, matching analyst expectations.

    
    Key Latin American stock indexes and currencies at 1510 GMT:
 Stock indexes                                daily %   YTD %
                                               change  change
                                   Latest              
 MSCI Emerging Markets               1009.25     0.39   16.59
 MSCI LatAm                          2564.66     1.28    8.19
 Brazil Bovespa                     63281.39     0.91    5.07
 Mexico IPC                         49125.89     0.69    7.63
 Chile IPSA                          4888.19     0.67   17.75
 Chile IGPA                         24505.89     0.62   18.19
 Argentina MerVal                   22514.31     0.74   33.08
 Colombia IGBC                      10685.20     0.07    5.50
 Venezuela IBC                      75876.83     0.79  139.32
                                                             
 Currencies                                   daily %   YTD %
                                               change  change
                                      Latest           
 Brazil real                          3.2282     0.23    0.65
 Mexico peso                         18.5660     0.24   11.73
 Chile peso                           671.93     0.14   -0.18
 Colombia peso                       2886.05     1.04    4.00
 Peru sol                              3.267     0.09    4.50
 Argentina peso (interbank)          16.0750     0.19   -1.24
                                                       
 Argentina peso (parallel)             16.31     0.49    3.13
                                                       
 

 (Editing by Jonathan Oatis)
  

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