FX.co ★ Brazil 10-Year Bond Yield Drops to Mid-August Lows

The yield on Brazil's 10-year government bonds has declined to approximately 13.8%, returning to levels not seen since mid-August. This shift comes as expectations for global interest rates ease and domestic inflation shows signs of improvement, which has significantly reduced both external and local risk premiums and increased demand for longer-term investments. Internationally, weaker job data from the United States and a decline in wholesale inflation have led to a drop in U.S. Treasury yields, convincing markets that the Federal Reserve will soon cut rates. This drop in U.S. yields has influenced the global yield curve, impacting Brazilian debt securities. Domestically, disinflation in August—evidenced by a decrease in annual inflation to 5.13% and subdued monthly price increases—has adjusted the inflation outlook to anticipate lower year-end levels. Consequently, the inflation risk premium in long-term bonds has decreased, and fixed-income investments have become more appealing, given that the Selic rate remains at historically high levels.