FX.co ★ Brazil 10-Year Bond Yield Drops From 3-Month High

The yield on Brazil's 10-year government bond decreased to 13.65% from the three-month high observed on January 20th. This dip results from increased demand and reduced short-term funding pressures, even as Brazil maintains a robust interest rate buffer. Foreign investments have played a significant role, with non-residents contributing over R$12 billion to Brazilian equities by late January and extending their interest to local bonds. This activity has helped absorb the supply, pushing bond prices upward. The favorable scenario is further supported by the Selic rate, which remains at 15%, and market expectations indicating the first rate cut will not occur until March. This situation preserves highly attractive real yields and sustains interest in longer-term debt driven by carry trades. Additionally, fiscal and external factors have contributed to reducing risk premiums. Record tax revenues projected at R$2.89 trillion for 2025 have alleviated immediate budgetary pressures, while foreign direct investment has largely offset the 2025 current account deficit, thereby minimizing rollover and foreign exchange funding risks.