Brazil Traders Shy From Bets on Rate Cuts They Think Are Coming
- Swaps curve pricing in only 13 basis points in extra cuts
- Traders thrown by central bank statement, will look to minutes
Traders work in Sao Paulo, Brazil.
Photographer: Nelson Almeida/AFP/Getty ImagesThis article is for subscribers only.
A central bank statement that underscored friction within the board tainted the pricing of Brazil’s swap curve, which is showing fewer cuts than traders and analysts think it should.
Policymakers’ decision to lower the country’s benchmark rate by 25 basis points to 10.5% last week met most expectations, but the accompanying statement — which showed a four-to-five split on the vote, and tried to cater to both dovish and hawkish arguments — created so much unease that the local swap curve reacted as if a major surprise had happened.