BRAZIL: DI Rates End Mixed On Tuesday

(RTTNews) - The one-day interbank deposit futures rates (DI rates) in Brazil ended mixed, with no clear path throughout the session, under the influence of locally traded U.S. dollar and amid the bets on the course of the basic interest rate in Brazil (Selic rate) this year.

In the background of the business is the external scenario, on the eve of the decision of the U.S. Federal Reserve (Fed) and the electoral uncertainties in Brazil.

The short stretch of the forward curve tracked the greenback's fall and kept the correction of the rates after the stress in the domestic market last week.

"The DIs started to price highs of up to 0.50 percentage points (pp) this month, but fell back after the strong intervention of the Central Bank," said a derivative manager.

However, the chief strategist of Banco Mizuho do Brasil, Luciano Rostagno, said that the intermediate vertices are more difficult to fall due to external and internal factors.

"This stretch has greater resistance to return premium because of electoral risk and US data, which suggest accelerating prices," he said, noting that the Fed decides tomorrow on the U.S. interest rate.

According to him, depending on who wins the presidential race in October, the Brazilian Central Bank may have to raise basic interest rates as early as 2018.

"The electoral scenario may anticipate the cycle of rising interest rates, but it will depend on who wins the election, agenda of reforms and fiscal commitment, in addition to the support of Congress," he noted.

The January 2019 DI contract rate was at 7.15%, from 7.19% at the previous session, while the January 2020 DI rate ended at 8.67%, from 8.65% on the same comparison. The January 2021 DI contract rate was at 9.75%, from 9.66%.