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Financial News: BRAZIL: DI Rates Open Higher Ahead Of Opinion

BRAZIL: DI Rates Open Higher Ahead Of Opinion Poll On 2018 Election

05/14/2018 - 13:44:00 (RTTNews)

(RTTNews) - The one-day interbank deposit futures rates (DI rates) in Brazil started the week slightly higher after economists surveyed by the country's central bank downgraded their economic growth forecasts. Investors are also adopting a cautious stance before the release of an opinion poll scheduled for Monday regarding this year's elections.

The survey would be the first one to capture voters support to presidential candidates after Joaquim Barbosa, a former Supreme Court justice, announced that he would not run for president this year.

Investors fear that voters who would support Barbosa change their votes to a candidate that is contrary to the current government's economic reforms - viewed by many market participants as essential for the Brazilian recovery.

Renascenia Corretora said in a report that candidates aligned to the market's agenda are not expected to show a good performance in the survey.

The January 2019 DI contract rate rose to 6.34%, from 6.315% on Friday, while the January 2020 DI rate increased to 7.34%, from 7.29%. The January 2021 DI contract rate was at 8.40%, from 8.37%.

Renascenia said that Brazilian interest rates are also tracking higher yields abroad after a "hawkish" speech from Loretta Mester, one of the voting members of the Federal Reserve's monetary policy committee.

She said that "with fiscal policy turning from restrictive to stimulative, the economy growing above trend, and investment rising, the short-term equilibrium interest rate [in the United States] is rising, too."

According to Bradesco's economic team, those comments suggest that changes in the economic outlook may lead to a higher U.S. interest rate than initially expected.

Bradesco also points to the lower economic growth forecast for 2018 in the Brazilian central bank weekly survey with market participants: "The market adjusted its expectations for this year: a weaker exchange rate, lower GDP growth and lower inflation."

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