Brazil is cooling down, but still hot when compared to US growth. Inflation falling means get into Brazilian gov't bonds

Brazil is slowing down a bit, after Foreign Direct Investment has been pouring in.  With noplace else to go, investors have been choosing emerging markets.  Treasuries have no meaningful yield.  Equities markets have little upside with the current malaise of bad information.  This is causing inflation in Brazil, India and China.  I mean what's not to love?  Lower debt levels and limited unfunded balance sheet liabilities.  I guess the IMF's policy recommendations did work after all.

In Brazil, output rose 0.4 percent (4.8% annualized) in July from a month earlier, the national statistics agency said today in Rio de Janeiro, compared with a 1 percent decline in June. The July figure was lower than the median estimate of a 0.8 percent increase among 36 analysts surveyed by Bloomberg. Output rose 8.7 percent from a year earlier.

Via Bloomberg:

Economists surveyed by Bloomberg expect the government on Sept. 3 to report that the economy expanded 8 percent in the second quarter from a year earlier, down from year-on-year growth of 9 percent in the first quarter.

The yield on the interest rate future contract maturing in January 2012, the most traded today on Sao Paulo’s BM&F Exchange, fell three basis points to 11.38 percent at 8:30 a.m. New York time. The real weakened 0.1 percent to 1.7618 per U.S. dollar.

Interest rate forecasts for year-end have fallen continually since early July, as the economy showed signs of cooling. Consumer prices unexpectedly fell in the month through mid-August, pushing the annual inflation rate below the government’s 4.5 percent target for the first time since January.

Policy makers raised the benchmark Selic rate in their previous three meetings from a record low of 8.75 percent, after Brazil’s economy grew at its fastest pace in 15 years in the first quarter, driven by record retail sales growth.
So equities markets in Brazil are hot and the yields on the government bonds keep falling.  Must be good to be in Rio right now.  Except for the crime.

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