The yield on Brazil’s 10-year government bond climbed to 13.8% in the final week of April, as rising energy prices heightened inflationary risks in the Brazilian economy. Talks between Iran and the United States appeared to have stalled, despite reports that Tehran had offered concessions aimed at reopening the Strait of Hormuz. This year’s increase in energy prices alone was sufficient for the Brazilian central bank to warn that inflation expectations could deteriorate, prompting it to dial back earlier signals of an aggressive easing cycle.
Although the BCB is still expected to trim the Selic rate by 25 basis points to 14.5%, recent comments from policymakers have underscored their vigilance on inflation, reinforcing market expectations that real interest rates will remain elevated. At the same time, a steeper rise in bond yields was contained by the Treasury’s R$44 billion nominal bond buyback conducted in March.
