Interest Rate Futures Further To Fall

With leading indicator data increasingly bearing out our view that economic activity in Brazil is starting to moderate, we believe that downside pressure on the overnight interbank deposit (DI) futures market are set to build further. The January 2011 contract fell 11 basis points (bps) between July 12 and July 14, and now stands at the lowest level since mid-June, indicating to us that investors are beginning to price in our long-held forecast for a second-half slowdown in Latin America's largest economy.

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