MARKETS: DI rates close higher on correction after retail data

São Paulo, 14 - The one-day interbank deposit futures rates (DI rates) in Brazil ended higher amid a correction triggered by retail sales data released earlier today, overshadowing the weakness...

São Paulo, 14 - The one-day interbank deposit futures rates (DI rates) in Brazil ended higher amid a correction triggered by retail sales data released earlier today, overshadowing the weakness of the industry and cooling the eve's bets of a cut in the Selic basic interest rate. Investors are also watching the locally traded U.S. dollar and the political scene. Retail sales excluding vehicles and construction materials increased by 0.4% in January 2019 over December 2018 in Brazil, and 1.9% over January 2018 beating the expectation in both comparison basis "The markets went through profit-taking, after the exaggerated euphoria yesterday," summarizes a derivatives trader at a national bank. According to professionals at the trading desks, the market corrects the "exaggerations" of the day before. "I would say today is almost a 'hangover,'" says a trader at a foreign brokerage firm. The movement in the yield curve is influenced by the surprise with retail sales numbers, which did not support the bets on new cuts in the benchmark interest rate, which gained strength yesterday after weak industry data. "Today, it's quite the opposite," adds the trader quoted above. For Santander's economic team, there does not seem to have been any significant structural change that indicates the need to increase the degree of stimulus to the economy. "In that sense, except for the occurrence of new episodes, it seems more appropriate to keep the basic interest rate in Brazil at 6.50% per year throughout 2019 ". Quantitas Assets' calculations show that the forward curve ended yesterday's session by pricing more than 50% chance of a cut in the benchmark interest rate at September's Monetary Policy Committee meeting. For this month's meeting, the odds of keeping the Selic rate at 6.50% per year hover around 100%. The January 2020 DI rates closed at 6.39%, from 6.355% in the previous settlement. The January 2021 DI contract settled at 6.97%, from 6.91%, while the January 2023 contract ended at 8.08%, from 7.98%. The January 2025 contract was at 8.61%, from 8.50%. Olívia Bulla / Agência CMA Translation by Ricardo Gozzi http://www.agenciacma.com.br/esp/



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MARKETS: DI rates close higher on correction after retail data

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