Brazil’s 10-year government bond yield declined to 14.45%, down from a near one-month high of 14.90% on August 14, after the release of the Genial/Quaest poll on the 2026 presidential election. The survey indicated a technical tie in a potential October runoff between President Lula and Senator Flávio Bolsonaro, with Lula at 42% of voting intentions and Bolsonaro at 41%. Markets generally view Bolsonaro as more fiscally conservative, while elevated domestic yields and weak business activity continue to weigh on the country’s economic outlook.
Meanwhile, Brazil’s GDP grew 0.5% in the second quarter of 2026, slightly above expectations and largely driven by the agricultural sector. However, the underlying details of the report were softer, suggesting that economic momentum is waning despite a tight labor market and short-term demand stimulus measures. For the BCB, the data indicate that the impact of previous monetary tightening is becoming increasingly evident, potentially creating room for further cuts to the Selic rate.
