The Brazilian real’s swings between gains and losses eased this week as Petroleo Brasileiro SA’s return to overseas capital markets with a $2.5 billion sale of 100-year notes added to speculation that the worst is over for the state-controlled oil company.
The drop in volatility from a three-year high since the end of March has reduced the risk for investors wanting to take advantage of Brazil’s interest rates, according to Ipek Ozkardeskaya, an analyst at London Capital Group.
The central bank raised the target lending rate Wednesday by a half-percentage point to 13.75 percent, the highest among the Group of 20 nations.
Two-month historical volatility dropped 0.56 percentage point this week to 17.77 percent in Sao Paulo, the lowest since May 21. The gauge of the currency’s fluctuations surged to 21.87 percent March 30, the highest since November 2011.
Overseas holdings of futures contracts wagering against the real fell to $36.2 billion as of June 3 after rising to a record $38.9 billion on May 28.
“Among its higher-yielding emerging-market peers, the actual rate differential and the anticipation for tighter monetary conditions in Brazil place the real on a higher rank for carry,” Ozkardeskaya said in an e-mailed response to questions. “The falling volatility on the currency markets also offers an interesting return-to-risk metric.”
In carry trades, investors get funds where borrowing costs are low and buy assets in nations that offer higher yields. Borrowing the dollar to buy the real has lost 11 percent this year amid concern that Latin America’s largest economy is contracting this year the most since 1990.
Petrobras Offering
The issuance by Petrobras this week was the first bond sale for the oil driller since a kickback scandal erupted last year. The company sold notes due in 2115 to yield 8.45 percent, 0.4 percentage point less than the initial price guidance from bankers.
The offering attracted more than $7 billion of bids, according to a person familiar with the matter who asked not to be identified because the information isn’t public.
Volatility has also fallen since President Dilma Rousseff’s administration achieved a breakthrough last month when the Senate supported efforts to reduce government budget deficits and avoid a credit rating downgrade.
The real declined Friday as U.S. job gains and the outlook for a Federal Reserve increase in interest rates overshadowed wagers that Brazil’s policy makers will raise borrowing costs twice more this year. The currency fell 0.3 percent to 3.1424 per U.S. dollar, paring its advance this week to 1.2 percent.
Swap rates on the contract maturing in January 2017, a gauge of expectations for changes in borrowing costs, climbed 0.09 percentage point to 13.67 percent. They were up 0.35 percentage point since May 29.
Ukraine, Belarus and Moldova are the only other nations in a group of 48 economies tracked by Bloomberg that are increasing rates this year. China, India and Russia, which together with Brazil form the BRIC group, have reduced borrowing costs to revive growth.
In the U.S., employers added 280,000 jobs in May following a revised 221,000 increase in the prior month, the Labor Department reported Friday. That exceeded the median forecast of economists surveyed by Bloomberg, which called for an increase of 226,000.
bloomberg.com
The drop in volatility from a three-year high since the end of March has reduced the risk for investors wanting to take advantage of Brazil’s interest rates, according to Ipek Ozkardeskaya, an analyst at London Capital Group.
The central bank raised the target lending rate Wednesday by a half-percentage point to 13.75 percent, the highest among the Group of 20 nations.
Two-month historical volatility dropped 0.56 percentage point this week to 17.77 percent in Sao Paulo, the lowest since May 21. The gauge of the currency’s fluctuations surged to 21.87 percent March 30, the highest since November 2011.
Overseas holdings of futures contracts wagering against the real fell to $36.2 billion as of June 3 after rising to a record $38.9 billion on May 28.
“Among its higher-yielding emerging-market peers, the actual rate differential and the anticipation for tighter monetary conditions in Brazil place the real on a higher rank for carry,” Ozkardeskaya said in an e-mailed response to questions. “The falling volatility on the currency markets also offers an interesting return-to-risk metric.”
In carry trades, investors get funds where borrowing costs are low and buy assets in nations that offer higher yields. Borrowing the dollar to buy the real has lost 11 percent this year amid concern that Latin America’s largest economy is contracting this year the most since 1990.
Petrobras Offering
The issuance by Petrobras this week was the first bond sale for the oil driller since a kickback scandal erupted last year. The company sold notes due in 2115 to yield 8.45 percent, 0.4 percentage point less than the initial price guidance from bankers.
The offering attracted more than $7 billion of bids, according to a person familiar with the matter who asked not to be identified because the information isn’t public.
Volatility has also fallen since President Dilma Rousseff’s administration achieved a breakthrough last month when the Senate supported efforts to reduce government budget deficits and avoid a credit rating downgrade.
The real declined Friday as U.S. job gains and the outlook for a Federal Reserve increase in interest rates overshadowed wagers that Brazil’s policy makers will raise borrowing costs twice more this year. The currency fell 0.3 percent to 3.1424 per U.S. dollar, paring its advance this week to 1.2 percent.
Swap rates on the contract maturing in January 2017, a gauge of expectations for changes in borrowing costs, climbed 0.09 percentage point to 13.67 percent. They were up 0.35 percentage point since May 29.
Ukraine, Belarus and Moldova are the only other nations in a group of 48 economies tracked by Bloomberg that are increasing rates this year. China, India and Russia, which together with Brazil form the BRIC group, have reduced borrowing costs to revive growth.
In the U.S., employers added 280,000 jobs in May following a revised 221,000 increase in the prior month, the Labor Department reported Friday. That exceeded the median forecast of economists surveyed by Bloomberg, which called for an increase of 226,000.
bloomberg.com
No comments:
Post a Comment