(Updates with final prices) By Bruno Federowski SAO PAULO, March 7 (Reuters) - Yields paid on Brazilian interest rate futures rose slightly on Tuesday despite worse-than-expected fourth-quarter economic data, as traders bet the central bank will be more focused on upcoming economic reports in deciding the pace of rate cuts.
Brazil's gross domestic product contracted by 3.6 percent in 2016, statistics agency IBGE said, following a 3.8 percent drop in 2015. The nation's two-year downturn is the worst on record for Latin America's biggest economy.
Still, rate future prices indicated investors were split over the size of a likely rate cut in April. Markets priced a 56 percent probability of a 100 basis-point reduction and a 44 percent chance of a 75 basis-point cut, traders said.
The central bank cut the benchmark Selic overnight lending rate by 75 basis points last month, to 12.25 percent. Since then, it has repeatedly stressed the pace of loosening will depend on the economic performance as well as inflation expectations.
The Brazilian real seesawed, tracking muted moves among other Latin American currencies.
Traders have been hunting for new clues over when the U.S. Federal Reserve will go back to raising rates, a move which many believe could come as soon as this month.
The Mexican peso extended recent gains to a four-month high, a day after the central bank sold $1 billion worth of foreign exchange hedging instruments to support the ailing currency.
Brazil's benchmark Bovespa stock index fell 0.9 percent, with shares of toll road operator CCR SA among the biggest decliners. CCR reported a 31 percent drop in fourth-quarter net income, missing analyst expectations.
Key Latin American stock indexes and currencies at 2345 GMT: Stock indexes daily % YTD % change change Latest MSCI Emerging Markets 936.50 0.22 8.61 MSCI LatAm 2597.02 -0.89 10.95 Brazil Bovespa 65742.32 -0.9 9.16 Mexico IPC 47419.16 -0.97 3.89 Chile IPSA 4476.43 0.2 7.83 Chile IGPA 22462.17 0.32 8.33 Argentina MerVal 19248.16 0.26 13.77 Colombia IGBC 9928.66 -0.09 -1.97 Venezuela IBC 38140.89 1.31 20.30 Currencies daily % YTD % change change Latest Brazil real 3.1201 0.22 4.14 Mexico peso 19.491 0.61 6.43 Chile peso 659 0.23 1.78 Colombia peso 2956.95 0.66 1.51 Peru sol 3.279 0.42 4.12 Argentina peso (interbank) 15.5475 -0.77 2.11 Argentina peso (parallel) 16.04 0.06 4.86 (Reporting by Bruno Federowski; Editing by Chris Reese and Leslie Adler)