FX.co ★ Brazil 10-Year Bond Yield Drops to 2-Month Low

In September, the yield on the 10-year Brazilian government bond dropped below 13.7%, reaching its lowest point in two months. This decline was influenced by reduced economic activity and easing inflation rates, alongside falling global long-term yields, which collectively drove down expectations for future real rates. Brazil's IBC-Br activity index showed a 0.5% month-on-month decrease in July 2025, marking the third consecutive decline and underperforming the -0.2% consensus forecast, indicating a slowdown in economic growth. Concurrently, yields on U.S. Treasuries decreased to their lowest in approximately five months as markets anticipated a 25 basis point rate cut by the Federal Reserve this week, with further easing expected later in the year, thereby affecting global long-rate benchmarks, including those in Brazil. This downward trend in long yields persists despite Brazil's unusually tight labor market, with unemployment standing at about 5.6% in the July moving quarter, which could influence how swiftly the central bank considers rate cuts and maintains a cautious policy outlook. It is widely anticipated that the central bank will uphold its current restrictive policy level in the upcoming meeting.