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Strategies & Market Trends : Telebras (TBH) & Brazil -- Ignore unavailable to you. Want to Upgrade?

To: DMaA who wrote (9625)	11/12/1998 10:06:00 AM
From: Steve Fancy	Respond to of 22640

Brazil's Ctrl Bk Lends On Overnight Interbank Mkt At 39% Dow Jones Newswires SAO PAULO -- One day after trimming its key lending rate, Brazil's central bank Thursday intervened on the overnight interbank market more cautiously than banks had expected. The central bank altered its overnight lending rate for the first time since Nov. 4, setting it at 39%, compared to projections by banks Wednesday for 36%. "The central bank played conservative because of a variety of pending factors," said Antonio Costa, fixed-income director at Oryx Asset Management in Sao Paulo. He cited congressional approval of fiscal austerity measures, a reduction in capital flight and confirmation of an aid package from international lenders as necessary precursors to large rate cuts. As reported, the central bank late Wednesday cut the Tban - the ceiling rate at which the government lends to banks - to 42.25% from 49.75%. Analysts were looking to the monetary authority's moves on the interbank market as an indicator of the government's willingness to trim rates quickly. In early September, the central bank decided to lend exclusively at the Tban rate - then 29.75% - discontinuing use of its basic TBC rate, which was 19%. On Sept. 10, the monetary authority raised the Tban to 49.75% in an effort to stem hefty capital outflows. In September and October, Brazil's markets showed a net outflow of $21 billion reals, pushing international reserves down to $45 billion from $67 billion at the end of August. The central bank began intervening on the overnight market in mid-September. It began lending at 39.75% and raised the rate 10 basis points every day until last week, which signaled to market participants that the government was ready to cut rates. Traders said the central bank has been forced to intervene on the interbank market to dry up excess liquidity caused by uncertainty surrounding Brazil's economy. Thursday, the central bank intervened three times. "It's a little unusual to have so much involvement from the central bank, but it's not worrisome on a day like this," said one trader. "(The central bank) is just balancing things out for the market." While analysts agreed that the government's moves Thursday on the overnight market were cautious, they said that they weren't a big surprise. "It obviously confirms that the government plans to take it slow to avoid a scenario in which they have to raise rates sharply again," said Eduardo Freitas, senior economist at Unibanco in Sao Paulo. "If all the important factors come together, then we could expect the (monetary policy committee) to be more aggressive in cutting rates on Dec. 16," he added. The first thing likely to provide impetus for a further reduction in rates, analysts said, is an announcement of the terms of an International Monetary Fund-led aid package, which market sources have pegged at over $40 billion. The central bank is also waiting for Congress to show progress in voting on measures in the government's fiscal plan. Controversial tax increases and budget cuts are scheduled to be addressed in the next five weeks. Analysts said Brazilian officials will also await clear signs that the investor exodus of the past few months has come to an end. So far in November, the local markets have shown a slight net outflow of $66 million. -By Stephen Wisnefski and Adriana Arai; (5511) 813-1988

To: DMaA who wrote (9625)	11/12/1998 3:50:00 PM
From: Caxton Rhodes	Respond to of 22640

In news from Brazil, their central bank cut the so-called Tban lending rate to 42.25% from 49.75%. The Tban was raised sharply September 10 in an effort to keep deposits in Brazil in the face of massive capital outflows occurring at the time. The outflows were sparked by investors abandoning emerging markets after Russia's currency devaluation and debt moratorium back in August. The positive implication of last night's move for Brazil's economy is that the capital flight from Brazil has eased. Indeed, month-to-date figures for foreign reserves in Brazil show a net inflow of capital to the country. While the interest rate decision gave investors in Brazil some positive news to trade on, an official announcement of the IMF-led lending package is still seen as foremost in investors' minds. IMF officials had said Monday that the details of that package should be announced “sometime this week.”