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quarta-feira, março 25, 2009

Our Mood for Today

A lot of discussions regarding the effectiveness of the US Treasury Plan
continue to drive opinions pro and against the measures announced. The ones
against affirm their concerns about the Banks willingness to sell their
portfolios at market prices (that should not be good due the current
difficult times). On their view the banks would recognize all the mess done
in the past that are not yet disclosed and could have even more problems on
the future. The optimistic ones on the other hand points that: "is there
another alternative at this moment?" it seems that it doesn't exist and any
help would be welcome even with bad prices. Particularly I'm together with
the optimistic ones but besides that I don't think it will be a calm ride
until we reach something more sustainable and stable. As mentioned
yesterday by Mr. Obama, the signs of recovery are already perceived and are
encouraging but we must be prepared for a long and difficult road ahead.
Today it was just released the durable good orders and it came really
better than expected showing and increase of 3.4% (market survey appointed
a decrease of 2.5 %!). Let's be realistic of course, but let's not also
discharge the good indicators and developments occurring nowadays.

As mentioned yesterday Mr. Lula should announce today the Housing Package
with the main objective of built 1 mm houses for the low income population.
There are good perspectives for the Construction and Housing Sector with
this program and all the companies that directly or indirectly deal with
the sector should contribute for an increase of the employment numbers
around here... Good measures that with a good implementation should help
Brazil to surpass current crisis more easily...

The IPCA-15 for March rose 0.11%, well below our forecast (0.26%) and also
below the market median expectations (0.25%) - this is the lowest rate
since September 2006. In the previous month, the preview rose 0.63%. The
y/y rate rose 5.65%. The index collapsed due largely to dilution of annual
school fee resets, which accounted for 54% of the rise in this index in
February and this month fell 0.43%. Food prices continued to cool thanks to
a fall in dry beans and meat, despite pressure from some unprocessed foods,
such as fruit and vegetables. However, the downward surprise came from the
Transportation group, which was pulled down thanks especially to prices of
new vehicles. This item fell to -2.26% from -1.32%, and, therefore, was the
biggest negative contribution to the index (-0.59 percentage point). The
core median decelerated from 0.50% to 0.20% as well as the diffusion index
(proportion of items with positive change) that fell to 59.64% from 64.3%
last month.

Analyzing each market now:

- Currency Market: The Central Bank should announce until tomorrow its
desire for the roll over of almost USD 7.5 bi in SWAP Contracts. With a
roll over of 100% we should expect another BRL appreciation movement. On
the other hand a partial roll over should create some room for USD
appreciation for a couple of days. That is the big market question for
today and tomorrow... After this process the good mood should indicate
further tests of current big support that is around the 2.21 levels.

- Interest Rate Market: The good number of the IPCA just released should
increase again the bets for another 150 bps cut on the next COPOM meeting.
With that in mind we uphold our call and recommend some LONG on the short
term (JUN and JUL 09 DI contract) to get advantage of future downside
movements of the CB.

- Stock Exchange Market: After the profit taking movement we expect another
good performance of the Stock Market during today's trading session. On
thing to mention was yesterday result of the REDECARD secondary offer. The
result was better than expected and almost 80% of the offer was bought by
foreigner investors. In my opinion a clearly signal of the investors
appetite for Brazil and the cheap prices of the shares around here...

- Sovereign and Corporate Debt Market: The increase in risk appetite
continues to contribute for a tightening movement affecting the CDS market.
Brazil 5Y CDS is trading now around 333 bps. New Issues on the near future?
I think so...


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