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quinta-feira, outubro 01, 2009

Our Mood for Today - 01.10.09

Reflecting the good moment of our economy it seems that the Central Bank President Henrique Meirelles had a meeting with Mr. Lula presenting his view of the current situation of our economy. He had confirmed the extremely positive trend and his desire to adopt a more proactive approach and increase the SELIC rate until the end of 2009 and have the possibility, depending on the markets behavior after the CB actions, to reduce that Rate until the end of 2010... That would be a good movement and could also help Mr. Lula's election strategy during 2010. Based on that we are adopting a SHORTXLONG strategy on the JAN11xJAN12 DI contracts around here aiming to get advantage of this situation.

The FGV IPC-S for the end of September has registered a rise of 0.18%, next to our projection (0.21%), slowing from 0.33% a week earlier. Once again the dynamics of food prices, now trending down, have determined the behavior of the index. Dairy products, rice and beans have continued to fall and prices of unprocessed foods have continued to decelerate. The main source of upside pressure has been the rise in clothing prices.

The Ministry of Development, Industry & Trade (MDIC) issues merchandise trade statistics for September. We estimate a surplus of US$2.2 billion, down from US$3.1 billion in August. Exports will have totaled US$14.1 billion, for a year-over-year decrease of 29.6%. Imports will have totaled US$11.9 billion, down 31.1% year over year.

Analyzing each market now:

- Currency Market: Same story... We uphold our call and recommend some LONG position on the BRL! Next support is around the 1.75 levels!!! Let's BUY BRL!!!!

- Interest Rate Market: As mentioned above we recommend some SHORTXLONG on the JAN11XJAN12 DI Contracts around here...

- Stock Exchange Market: The ISM came worst than expected, not good. Now the PAYROLL tomorrow... Together with the stocks we recommend some PUTS to hedge the positions...

- Sovereign and Corporate Debt Market: The Republic of Brazil has printed USD 1.25 bi with its new 2041 issue. Good demand with a record low Coupon of 5.625%.... Also Embraer has priced its 2020 new issue. It came at 6.50% as we expected with some juice for the secondary market... Demand reached almost USD 4 bi reflecting the good moment of Brazil and Brazilian Assets... Market continues to be well supported by the new money coming and that should continue for a while... We keep our constructive bias for the corporate market during this month of new issues... Brazil 5Y CDS is trading around 130 bps (+4bps). BR 40 is trading around 177 SOT (+3bps).

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