Brazil interest rate mkt nervous on gloomy outlook
Reuters, Thursday, September 10, 1998 at 13:07
SAO PAULO, Sept 10 (Reuters) - Trading in Brazil's interest
rates came to a virtual standstill by midday Thursday as
nervous dealers became increasingly uncertain about the outlook
on lending rates and the country's currency markets.
Brazil's interbank money markets saw practically no deals
after a Central Bank move earlier in the day, to sell Central
Bank Bonds (BBCs) with an annual interest prefixed at 31.5
percent, confused players, dealers said.
The bank sold the pre-fixed papers for the first time since
June 2 in a bid to stabilize rates and indicate to the market
that it does not expect rates to rise much more.
The bank has already practically raised prime lending rates
by 50 percent, to 30 percent a year, last Friday by declaring
it would only loan money to banks at its Tban assistance rate,
which currently stands at 29.75 percent.
Dealers speculated that today's BBC auction was an attempt
by the bank to make clear to the market that it is not willing
to pay rates much higher than the Tban.
However, "the market lost an idea on where the correct
interest rate levels should be," one dealer said.
In the futures market, overnight interbank deposits (DI)
were soaring, with the October contracts quoted at 40.41
percent per year, more than 10 percentage points above the
current Tban.
Amid all the confusion were dealers' persistent worries
over huge dollar outflows reported from Brazil's commercial and
floating market in recent days.
A massive $1.142 billion fled Brazil's forex markets on
Wednesday as a string of government measures to cap the
outflows failed to bear immediate fruit, forex traders said.
noriko.yamaguchi@reuters.com))
Copyright 1998, Reuters News Service |
