EMERGING MARKETS-Latam assets rise; Brazil's stocks jump after inflation data

By Pranav Kashyap

May 27 (Reuters) - Most Latin American assets advanced on Tuesday, with Brazil's benchmark stock index near record highs, while the Argentine peso advanced after the government's plan to issue new local debt.

Brazil's stock index .BVSP rose 1.33%, flirting with record highs as inflation decelerated more sharply than anticipated in the month to mid-May, fresh data showed.

This marks the third consecutive deceleration, a testament to the bite of tight monetary policy. Benchmark interest rates are parked at their highest levels in nearly two decades.

"The fall ... increases the probability of a hold. Much hinges on the first quarter GDP figures out on Friday," said Kimberley Sperrfechter, emerging markets economist at Capital Economics.

The Brazilian real BRL= rose 0.26% against the U.S. dollar. The central bank held an up to $1 billion-dollar auction with repurchase agreement.

Argentina's peso ARS= rose as much as 1.1%, while stocks .MERV ticked up 0.1%, after rising 1% in the previous session.

The country's international dollar bonds also firmed on the day.

Argentina announced a $1 billion domestic five-year bond on Monday, structured to attract international investors, who will subscribe in U.S. dollars and receive coupon payments and principal in Argentine pesos.

Investor confidence in Argentine assets has been on a steady incline, particularly after the nation secured a $20 billion loan program with the International Monetary Fund in April.

Argentina has also dismantled significant currency and capital controls, permitting the peso to fluctuate more freely within a managed band.

These moves are central to libertarian President Javier Milei's agenda. Since taking office in late 2023, he has aimed to lure back international investors and extricate the nation from a deep-seated economic crisis, deploying austerity measures and fiscal discipline.

MSCI's gauge for the region's equities .MILA00000PUS jumped 1.6%, while an index for currencies .MILA00000CUS ticked up 0.17%.

In Mexico, the peso MXN= appreciated 0.24%, and the local stock market .MXX also gained nearly 1%. The nation prepares for its first judicial elections this Sunday. Voters will select from 5,000 candidates for federal judge and magistrate roles, a slate that includes all Supreme Court justice positions.

A broader wave of positive sentiment buoyed Latin America relating to U.S. President Donald Trump's announcement of a postponed deadline for threatened tariffs on the European Union.

The region's currencies also caught a tailwind from a weakening U.S. dollar, which has faced headwinds as investors increasingly seek geographically diversified portfolios.

Concerns lingered regarding Trump's proposed sweeping tax and spending bill, now navigating the Senate, and its potential to swell the debt burden of the world's largest economy.

The dollar index =USD was heading for a fifth straight month of declines against a basket of currencies, which would mark the longest such losing streak since 2017. FRX/

Elsewhere in the region, the Chilean peso CLP= rose 0.16% and the Colombian peso COP= advanced 0.63%.

Key Latin American stock indexes and currencies: