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Financial News: BRAZIL: DI Rates End Lower Before Copom Minutes

BRAZIL: DI Rates End Lower Before Copom Minutes And Eyeing Treasury Action

05/21/2018 - 18:02:00 (RTTNews)

(RTTNews) - The one-day interbank deposit futures rates (DI rates) in Brazil ended lower, weighed by a stronger real and as traders turned cautious before the release of the latest monetary policy meeting minutes, scheduled for Tuesday morning.

Investors are also keeping an eye out for a potential Brazilian Treasury Department intervention to increase liquidity in the sovereign debt markets, allowing investors to square their positions in longer-term bonds with a relatively low yield.

The January 2019 DI contract rate fell to 6.635%, from 6.685% last Friday, while the January 2020 DI rate decreases to 7.66%, from 7.76%. The January 2021 DI contract rate was at 8.79%, from 8.92%. The January 2023 rate, however, was at 10.07%, from 10.15%. The locally traded U.S. dollar fell 1.36%, to R$ 3.6880.

A senior derivatives trader said that the DI rates market was influenced by the Brazilian central bank's decision to step up its foreign exchange market intervention to curb the dollar rise. He added that investors started to "ask for" an intervention from the Treasury Department in sovereign debt auctions so that people with long-term investments and low rates could wind down their positions.

"But I do not think that the Treasury will act that way. The market should find a balance," the trader said.

Guide Investimentos economist, Ign?cio Crespo, said that the Brazilian markets are waiting for the minutes of the monetary policy committee (Copom) meeting. The group kept the Brazilian benchmark interest rate unchanged at 6.5%, while investors expected a 25 basis-point decrease.

"The minutes should clarify the reasons that led the Copom to change its mind," he added, referring to the group's March statement, in which it signaled that it could cut the benchmark interest rate further in May.

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