FX.co ★ Brazil 10-Year Bond Yield Falls Near 1-Year Low

The yield on Brazil's 10-year government bonds has dropped below 13.5%, reaching its lowest point in nearly a year. This decline aligns with the reduction in U.S. Treasury yields, which has lessened the global risk-free benchmark and allowed long-term rates in emerging markets to decrease. Investors are capitalizing on higher returns. In Brazil, the central bank's Selic rate remains high at 15%, with officials indicating a lengthy pause in changes and suggesting any rate reduction will be gradual. This approach maintains a substantial policy cushion and enhances the attractiveness of Brazil's longer-term bonds for portfolios focused on returns. Moreover, reduced financing needs and improved inflation expectations have lessened the risks associated with future policy and sovereign funding. The Focus bulletin has lowered the 2025 IPCA inflation forecasts, and foreign direct investment in October was sufficient to cover the current account deficit for the month. These factors collectively reduce the term premium on Brazilian bonds.