Brazil’s 10-year government bond yield held near 13.5% as investors weighed the country’s elevated Selic rate against a renewed rise in inflation. Mid-month inflation rose 0.8% in February, well above the 0.6% forecast, driven largely by higher education and transport costs. The upside surprise has complicated the outlook for the Central Bank of Brazil, which kept its policy rate at 15.0% in January but had flagged the possibility of a cut at its March 18 meeting.
On the fiscal side, record 2025 tax revenue of R$2.89 trillion and a January trade surplus of $4.34 billion offer some support. Even so, a robust labor market and persistent price pressures have led traders to scale back expectations for aggressive monetary easing. Brazilian bond yields also remain exposed to global trade volatility and to the move in US Treasury yields below 4.0%. At the same time, Brazil’s substantial real yield premium continues to draw in foreign capital as markets wait to see whether the central bank will put its inflation target ahead of growth concerns.
