The cheapest Brazil inflation-linked bonds in 14 months are prompting Bank of America Corp. and SulAmerica Investimentos to recommend the debt on concern President Luiz Inacio Lula da Silva’s successor will fail to keep consumer prices in check.
Brazil’s exchange rate may weaken to 2.40 reais per U.S. dollar in one to two years after the Federal Reserve signaled it may pare back monetary stimulus, said David Beker, the chief Brazil economist at Bank of America Merrill Lynch.
Brazilian traders are paring bets on interest-rate increases by the most in six weeks on speculation President Dilma Rousseff will propose a budget cut big enough to help bring inflation down from a two-year high.
Argentine dollar-denominated bonds due in 2012 are being recommended by Bank of America Corp. as the government prepares to make a $2.2 billion payment today, leaving 25 percent of the total issue outstanding.
Brazil’s central bank President Alexandre Tombini said inflation will converge to the bank’s 4.5 percent target in the third quarter of 2013 even as new data showed the pace slowing less than expected.