FX.co ★ Brazil 10-Year Bond Yield Declines

The yield on Brazil's 10-year government bonds recently decreased to approximately 13.9%. This shift occurred as markets reassessed the external risk premium, factoring in a more favorable near-term policy environment. An easing of trade tensions between the United States and China lowered the likelihood of a sudden decline in commodity exports, positively impacting the current account and reducing risk premiums. Concurrently, signals of slower global economic growth and declining U.S. Treasury yields contributed to a decrease in global long-term interest rates. On the domestic front, cooler inflation data reinforced a dovish stance at Brazil’s central bank, leading to a reduction in inflation risks embedded in the yield curve. Additionally, Brazil's still-high real policy rate maintained its carry appeal, attracting renewed foreign interest in long-term investments, which further compressed yields.