Brazil’s 10-year government bond yield fell to around 14.24%, approaching the three-month low of 14.13% reached on September 8th, after inflation data came in weaker than expected. The annual inflation rate slowed to 4.22% in August 2026 from 4.44% in July, slightly below market expectations of 4.27% and moving further into the central bank’s target range of 1.50%–4.50%. This reinforced expectations that the BCB will cut the Selic rate by another 25 basis points at next week’s Copom meeting.
At the same time, recent polls have shown Flávio Bolsonaro gaining ground in the presidential race. Markets perceive Bolsonaro as more fiscally conservative, while elevated domestic yields and subdued business activity continue to weigh on the economic outlook. The bond move gathered additional momentum as an escalating dispute between Supreme Court justices Alexandre de Moraes, viewed as an ally of President Lula, and André Mendonça intensified into an institutional crisis.
