Brazilian interest rate derivatives traded near stability on Wednesday as short-term DI contracts held flat, reflecting limited reaction to the latest IPCA-15 inflation print. The DI rate for January 2028 was at 13.81%, unchanged from the previous session's adjusted level of 13.813%, while the January 2035 contract eased 3 basis points to 14.425%.
The IPCA-15 inflation index for August declined 0.40% month-over-month, a sharper drop than the 0.06% rise recorded in July and exceeding market expectations for a 0.30% decrease. Despite the headline improvement, underlying services inflation showed persistent strength. Adjacent services inflation rose to 0.50% from 0.30%, while labor-intensive services accelerated to 0.55%. General services inflation, however, slowed significantly to 0.07% from 0.41%.
The central bank's core inflation average increased slightly to 0.22% in August from 0.20% in July. Food prices at home continued to deflate, with a 0.97% drop in August following a 1.14% decline in July. The subservient services measure, tracked closely by policymakers, remained around 4.6% in the annualized quarterly moving average.
In the U.S., Treasury yields edged higher as the 10-year note rose 1 basis point to 4.651%. The core PCE price index increased 0.2% in July, matching expectations, while the headline PCE index also advanced 0.2%. Second-quarter GDP growth was reported at 1.5%, in line with forecasts.
Analysts noted the mixed inflation signals. Flavio Serrano, chief economist at Banco BMG, said markets initially reacted to the IPCA-15 surprise but later stabilized as the breakdown did not deviate materially from expectations. Leonardo Costa, economist at ASA, highlighted that core inflation components outperformed forecasts, though underlying services inflation accelerated on the margin, remaining near 4.6% in the annualized quarterly moving average. He added that goods inflation continued to decelerate, reflecting normalization following prior oil price shocks.
