Skittishness over a looming invasion of Iraq is clobbering Brazil. In a move that is at very least indirectly linked to the escalating conflict, Brazil's Central Bank jacked up the benchmark interest rate by 100 basis points to 26.5% last week and lifted reserve requirements on demand deposits to 60% from 45%. That dashed hopes that rising investor comfort with the new presidential administration would swiftly bring down rates. The upshot for the securitization sector is that deal making is tougher.
"Why would anyone go into illiquid, unusual paper when treasuries are paying so much?" asked one market participant.