Brazilian Bond Yields Rise After Economists Raise CPI Forecast

By Adriana Brasileiro
Feb. 9 (Bloomberg) -- Brazil’s local currency bond yields rose the most since November after a central bank survey showed faster estimates for inflation, raising speculation the central bank may not act as aggressively in easing borrowing costs.
“There is some concern about a pickup in inflation,” said Ricardo Lemos, a fixed-income strategist at Sao Paulo-based Liquidez, Brazil’s largest currency derivatives brokerage.
The yield on Brazil’s zero-coupon local-currency bonds due January 2010 jumped 16 basis points, or 0.16 percentage point, to 11.24 percent at 2:26 p.m. New York time, after most trading in Brazil had ended. It was the biggest advance since the yield rose 20 basis points on Nov. 13.
Yields on the benchmark bond had fallen 95 basis points from the start of the year to Jan. 21, when the central bank unexpectedly lowered the Selic overnight rate by a full percentage point to 12.75 percent. The cut, the biggest since 2003, was a bid to fuel growth in Latin America’s largest economy as the global recession reduces demand for the country’s exports and financial assets.
Economists forecast the benchmark IPCA consumer price index will end 2009 at 4.73 percent, compared with a previous estimate of 4.60 percent, according to a weekly central bank survey taken Feb. 6 and published today.
Consumer prices measured by the FIPE economics research institute probably rose 0.46 percent in the month to Feb. 7, compared with an advance of 0.36 percent in the previous period, according to the median of estimates by nine economists in a Bloomberg survey shows. FIPE is scheduled to release the data at 2 a.m. New York time.
The yield on Brazil’s overnight futures contract for July delivery climbed seven basis points to 11.65 percent.
Brazil’s real fell 0.7 percent to 2.2595 per U.S. dollar, from 2.2435 on Feb. 6.
The currency strengthened 3.5 percent last week, the biggest increase since November, on speculation government measures worldwide will ease the global recession and increase demand for Brazilian exports and financial assets.