Brazil’s 10-year government bond yield inched up to 14.81%, after briefly touching 14.79% on July 29th, as investors digested stronger-than-expected labor market data alongside the latest Federal Reserve policy decision. Brazil generated a net 145,161 formal jobs in June, surpassing market expectations of 115,000, underscoring the resilience of the labor market and bolstering views that the BCB may adopt a more hawkish stance. In June, the central bank cut the Selic rate from 14.50% to 14.25%, but stressed that labor market strength continues to fuel services inflation.
The Fed, as anticipated, left interest rates unchanged, though three FOMC members argued for a hike, heightening concerns that global borrowing costs could remain elevated for longer. The Copom is scheduled to meet on August 4–5th to set the next Selic rate. At the same time, signals of higher deficit spending by the federal government have intensified fiscal worries, while government revenues are coming under pressure from newly imposed US tariffs.
