March 22, 2018 / 5:32 PM / a year ago

EMERGING MARKETS-Brazil rate future yields drop as central bank points to further easing

    By Bruno Federowski
    SAO PAULO, March 22 (Reuters) - Yields on Brazilian interest
rate futures dropped on Thursday after the central bank
unexpectedly indicated it will continue cutting interest rates
at its May meeting.
    The bank on Wednesday reduced the benchmark Selic rate by 25
basis points to an all-time low of 6.50 percent, as widely
    But policymakers were explicit in forecasting another cut,
contradicting the consensus that this week would mark the end of
the deepest easing cycle in a decade. After that, unless
conditions change radically, it would stand pat, according to a
policy statement.
    Yields on rate futures fell sharply as traders adjusted
their bets. 
    "Unless the Brazilian real comes under pressure for domestic
or external reasons, the central bank will be in no hurry to
begin the tightening cycle," economists at Societe Generale
wrote in a report.
    The Brazilian real weakened around 1 percent on
concerns that lower rates could dampen demand for Brazilian
assets. It was the biggest loser among Latin American
currencies, which suffered the effect of growing fears of U.S.
    The nation's stock exchange, however, was nearly
flat, as shares of steelmakers jumped after the United States
government suspended a tariff hike on Brazilian steel and
aluminum imports as it begins bilateral negotiations.    
    Key Latin American stock indexes and currencies at 1720 GMT:
 Stock indexes                    Latest       Daily     YTD
                                                 pct     pct
                                              change  change
 MSCI Emerging Markets             1,197.27    -1.02    4.42
 MSCI LatAm                        3,032.81     -0.5    7.77
 Brazil Bovespa                   84,962.60    -0.02   11.20
 Mexico IPC                       47,342.78    -0.38   -4.08
 Chile IPSA                        5,499.13    -0.66   -1.18
 Chile IGPA                       27,585.58     -0.6   -1.41
 Argentina MerVal                 32,181.70    -0.58    7.04
 Colombia IGBC                    11,508.38    -1.14    1.21
 Currencies                          Latest    Daily     YTD
                                                 pct     pct
                                              change  change
 Brazil real                         3.3014    -1.02    0.36
 Mexico peso                        18.5150    -0.41    6.39
 Chile peso                             608    -0.69    1.09
 Colombia peso                      2,862.5    -0.40    4.17
 Peru sol                             3.241     0.31   -0.12
 Argentina peso (interbank)         20.2250     0.25   -8.03
 Argentina peso (parallel)            20.88     0.48   -7.90

 (Reporting by Bruno Federowski
Editing by James Dalgleish)
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