HALISTER1: Brazil Swaps Drop on Expectation of Dovish Statement: Quantitas

Brazil Swaps Drop on Expectation of Dovish Statement: Quantitas

(Bloomberg) -- Falling swap rates reflect investors expectations that BCB may release a “dovish” statement, Matheus Gallina, fixed income trader at Quantitas Gestao de Recursos, says in a phone interview.
  • While today’s decision is likely to stick to the expected 25bps cut, BCB may signal pace will be accelerated to 50bps at January’s meeting
  • Two points to be monitored in BCB messages are: potential removal or toning down of previous BCB warning on services inflation, and possible mention of weak activity
  • Political relief after government win in Senate vote on spending cap bill also helps decline in long-end DI rate
    • “The bill has advanced according to the plan, or even better”
    • Earlier BRL drop reflected rise in UST yields
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Matheus Gallina (Quantitas Gestao de Recursos SA)

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