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Bonds News

EMERGING MARKETS-Brazil's real hits 5-month low ahead of rate move; Latam FX falls

    * Real falls as central bank seen keeping rates unchanged 
    * FX market volatility rises on U.S. election uncertainty
    * Latam stocks index set for worst day since late April 

 (Updates prices throughout; adds comments, bullets)
    By Shreyashi Sanyal
    Oct 28 (Reuters) - Brazil's real touched a five-month low on
Wednesday on expectations the central bank will leave its policy
rate unchanged, while other Latin American currencies fell on
uncertainty about the outcome of U.S. elections.  
    The real tumbled 1.2% to fall for the fourth
straight day as Brazil's central bank was seen leaving its
benchmark Selic rate at a record low of 2.0% at 2100 GMT. 
    "The extension of the budget deficit in an effort to fight
the effects of the pandemic is limiting the central bank's scope
to cut rates further," said Melanie Fischinger, FX and emerging
markets analyst at Commerzbank. 
    Brazil's currency is among the worst performing emerging
market units this year, falling 30%, as fears remained about the
 government overshooting its spending ceiling to fund a new
fiscal package. 
    "It is looking increasingly likely that the Brazilian
government will violate its constitutional spending cap, or at
least the spirit of it," said Thomas Mathews, markets economist
at Capital Economics. 
    "Abandoning the cap would see further depreciation of the
real against the U.S. dollar, and perhaps an increase in
Brazilian government bond yields."
    Most emerging market currencies weakened against the dollar
 as traders hedged against the possibility of a Democratic
sweep in Tuesday's U.S. elections. Gauges measuring expected
swings in foreign exchange markets rose, with one-week contracts
that cover the vote reaching their highest levels in nearly
seven months.
    Surging novel coronavirus cases also kept risk sentiment at
bay, while a 5% fall in oil prices pushed currencies of
crude-exporters including Mexico and Colombia
lower.
    The Mexican peso tumbled more than 0.9%, while Colombia's
peso slipped 0.5%. 
    Chile's peso bucked an eight-day winning streak to
fall 0.1%, with local investors focusing on the country's path
to reframe its constitution.   
    Argentina auctioned a dollar-linked bond and other debt for
a total of about $3.18 billion on Tuesday, the economy ministry
said, as the government looks to ease pressure on the battered
peso currency. The country's peso currency was flat. 
    The MSCI's index for Latin American stocks
tumbled 4.5%, on track for its worst one-day percentage decline
since late April. 
    Sao Paulo stocks tumbled 3.5%, with heavyweight
miner Vale falling 2%. 
    Santiago stocks dropped 1.8%, weighed by a 2%
decline in shares of Banco Santander-Chile after
it expected to show a fall in quarterly revenue.
    
    Latin American stock indexes and currencies at 1915 GMT:
            Stock indexes                    Latest   Daily %
                                                      change
 MSCI Emerging Markets                       1120.34     -1.2
 MSCI LatAm                                  1841.97    -4.52
 Brazil Bovespa                             96080.05    -3.54
 Mexico IPC                                 37444.13    -1.47
 Chile IPSA                                  3630.24    -1.81
 Argentina MerVal                           44391.44   -4.959
 Colombia COLCAP                             1130.56    -2.75
                                                             
               Currencies                    Latest   Daily %
                                                      change
 Brazil real                                  5.7483    -1.16
 Mexico peso                                 21.2051    -0.83
 Chile peso                                    773.7    -0.12
 Colombia peso                                3828.5    -0.55
 Peru sol                                     3.6117    -0.14
 Argentina peso (interbank)                  78.3000     0.01
                                                      
 Argentina peso (parallel)                       174     4.02
 


 (Reporting by Shreyashi Sanyal in Bengaluru; Editing by
Bernadette Baum and Grant McCool)
  
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