2018.06.2915:10:00UTC+00BRAZIL: DI Rates Close Lower With USD, Central Bank, Opinion Poll

The one-day interbank deposit futures rates (DI rates) in Brazil ended lower Thursday, reacting to the Quarterly Inflation Report (RTI). Investors perceived a soft tone by the Brazilian Central Bank regarding the effect of the truckers' strike on inflation (IPCA).

They also saw in the downward revision in the estimate for economic growth (GDP) in 2018 a greater chance of basic interest rate to remain stable until the end of the year. The fall of the locally traded U.S. dollar helped in the forward curve movement.

"The market has read the RTI optimistically," said Nova Futura chief economist Pedro Paulo Silveira. He highlighted the Central Bank's emphasis on weak activity and the transitional aspect of the price shock coming from the truckers' strike.

In a report, Itau points out that the Central Bank's projections for inflation and GDP point to a relatively comfortable scenario, which reinforces the prospect of stability in the basic interest rate. "We keep the view that the Selic should remain at 6.50% until at least the end of this year," said the bank's chief economist, Mario Mesquita, in the report.

In addition, Silveira, from Nova Futura, noted that the domestic market also "breathed a sigh of relief" with the numbers on the presidential race brought by the CNI-Ibope poll, which brought former senator Marina Silva "nearing" Jair Bolsonaro's voting intentions.

"The positive news, although timid, helped to interrupt the devaluation cycle of the Brazilian real," he said.

The January 2019 DI contract rate was at 6.825%, from 6.97% in the previous settlement, while the January 2020 DI rate ended at 8.33%, from 8.55%. The January 2021 DI contract rate was at 9.35%, from 9.55%.