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MARKETS: DI rates open lower as inflation decelerates

Oct 09, 2019 (Grupo CMA via COMTEX) --

São Paulo, 9 - The one-day interbank deposit futures rates (DI rates) in Brazil opened lower as investors react to a sharper-than-expected deceleration of the official consumer price inflation index (IPCA) in September. The reading fuels bets that the Selic basic interest rate may drop to a new historical floor before the end of the year. The outlook, however, reduces the momentum of the falling American dollar. "IPCA monthly deflation in September strengthens Selic's call by 4.5%," says Necton Corretora chief economist André Perfeito. For him, the inflation reading reaffirms the perspective that the Brazilian Central Bank should bring down the basic interest rate to less than 5.00%, as currently expected by "a still minority share" of the financial market players. Quantitas Asset calculations show that the forward curve ended yesterday's session pricing 90% odds of a 0.50 percentage point (pp) cut in the Selic rate later this month, with the remainder (10%) indicating possibility a lower reduction. By the end of the year, the forward curve projects an additional 0.25 pp cut in December, bringing the rate to 4.75%. At the beginning of the session, the January 2020 DI contract rate was at 4.957%, from 4.987% in the previous settlement. The January 2021 DI contract rate was at 4.75%, from 4.82%, while the January 2023 contract was at 5.90%, from 5.97%. The January 2025 contract was at 6.56%, from 6.61%. Olívia Bulla / Agência CMA Translation by Ricardo Gozzi

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