FX.co ★ Brazil 10-Year Bond Yield Declines to 1-Year Low

Brazil's 10-year government bond yield fell below 13.25%, marking a one-year low, as investors increasingly anticipate a shift towards more lenient monetary policy following recent GDP data. The GDP growth was recorded at 1.8% year-on-year for the third quarter, the slowest pace in over three years, indicating a deceleration in economic momentum. This has heightened the likelihood that the central bank may start to reduce interest rates, which are currently near a two-decade high. Despite the slowdown, it remains broad yet gradual, with a strong labor market and continued real wage growth bolstering household incomes and tax revenues, thus alleviating immediate fiscal pressures. Headline inflation decreased to approximately 4.68% in October, weakening the argument for maintaining the Selic rate at its historic peaks and reducing nominal term premiums. Furthermore, recent adjustments in fiscal policies have lowered perceived sovereign risk, and declining U.S. Treasury yields have decreased the global risk-free rate, prompting investment into higher-yielding Brazilian assets and contributing to the reduction in local bond yields.