Morgan Stanley expects USD/BRL to test 5.60; if fiscal concerns intensify the
pair could hit 6.00. Brazilian interbank rates are forecast to decline in phased
cuts of 300–400 bps. Over the next few days Morgan Stanley sees Brazil 10-year
sovereign spreads widening about 50 bps and 5-year CDS widening about 40 bps. It
forecasts Brazilian equities to drop 20–30%, with pronounced stock-level
dispersion.