FX.co ★ Brazil 10-Year Bond Yield Hovers at April's High

The yield on Brazil’s 10-year government bonds remains at approximately 14.15%, a level not observed since late April. This reflects persistent investor concerns regarding Brazil's fiscal outlook and elevated interest rates. This bond yield is closely aligned with Brazil’s benchmark Selic rate, which stands at 14.75%. Investor unease is primarily driven by projections foreseeing the gross public debt reaching a peak of 84.2% of GDP by 2028, largely due to increasing interest payments. Although the government has set ambitious targets for achieving a primary surplus, doubts about their practicality persist, especially in light of upcoming elections that could lead to higher spending. External factors also impact sentiment, including global inflation and increasing US Treasury yields. Additionally, the US House's approval on May 21 of a new fiscal package involving tax cuts, heightened defense spending, and adjustments to social programs is anticipated to increase US public debt, potentially raising global interest rates and exerting additional pressure on emerging markets such as Brazil.