December 3, 2013 / 11:31 AM / in 4 years

Brazil interest rate futures drop after weak GDP data

RIO DE JANEIRO, Dec 3 (Reuters) - Brazil’s interest rate futures opened lower on Tuesday after data showed the country’s economy contracted more than expected in the third quarter, reflecting the perception that the central bank could have less room to tighten monetary policy in coming months.

Interest rate contracts maturing in January 2005 dropped 7 basis points to 10.68 percent after the government statistics agency IBGE said gross domestic product shrank 0.5 percent in the third quarter from the previous period, a steeper fall than the 0.2 percent contraction forecast by economists.

Brazil’s yield curve still priced in a 60 percent probability that the central bank will raise its benchmark Selic rate by half a percentage point in January, to 10.5 percent, according to Reuters data. However, bets on a 25-basis-point increase in the Selic have increased to 40 percent from about 30 percent late on Monday.

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