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MARKETS: DI rates trade 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 keep on trading 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. Fixed income, derivatives traders say September's IPCA monthly deflation endorses Selic's downward prospects. Renascença Corretora fixed-income trader Luís Felipe Laudísio says that the forward curve currently prices Selic at around 4.70% at the end of this year. "[Pricing] should be closer to 4.50% or 4.75%, corroborating the view of controlled inflation and likely extended maintenance in 2020," he says. According to him, the domestic market players also monitor the noises between President Jair Bolsonaro and his PSL right-wing party. For Infinity Asset chief economist Jason Vieira, the possibility of the president leaving the party is "madness" as it has the largest bench in the House of Representatives. Near the end of the session, the January 2020 DI contract rate was at 4.952%, from 4.987% in the previous settlement. The January 2021 DI contract rate was at 4.71%, from 4.82%, while the January 2023 contract was at 5.86%, from 5.97%. The January 2025 contract was at 6.52%, from 6.61%. Olívia Bulla / Agência CMA Translation by Ricardo Gozzi

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