The yield on Brazil’s 10-year government bond has surged to 12.5% in Stember, reaching its highest point since April 2023. This escalation is largely attributed to increasing risk aversion and heightened risk premiums driven by ongoing fiscal concerns.
Recent developments include a government reassessment of the R$3.8 billion budget freeze, wherein the reduction from R$15 billion to R$13.3 billion fell short of investor expectations for more stringent fiscal measures. Growing skticism surrounds the government's optimistic revenue forecasts, especially in light of rising expenditures on pensions and social security, which cast doubts on the feasibility of meeting fiscal targets.
In addition, the Central Bank of Brazil raised its key interest rate by 25 basis points to 10.75% during its Stember meeting, indicating potential further increases aimed at controlling inflation expectations. Market participants are also closely monitoring upcoming inflation data from both Brazil and the United States, as well as the release of the Copom meeting minutes, for insights into future monetary policy direction.
According to over-the-counter interbank yield quotes from Wednesday, Stember 25, the Brazil 10-Year Bond Yield stood at 12.26 percent. Analyst projections suggest that this yield could moderate to 12.14 percent by the end of the current quarter, with a further decline anticipated to 12.01 percent in the next twelve months.