FX.co ★ Brazil 10-Year Bond Yield Drops After Inflation

The yield on Brazil's 10-year government bond has decreased to approximately 13.6%, owing to lower inflation readings and a decline in global interest rates. October's IPCA inflation rate came in at 4.68%, falling short of the consensus expectations and indicating that disinflation is underway, albeit still slightly above the Central Bank's tolerance limit of 4.5%. This development has strengthened market anticipation of potential interest rate cuts in the first quarter, provided that the downward trend persists. The Central Bank's decision (Copom) to maintain the Selic rate at 15%, while emphasizing the necessity for elevated rates over a prolonged period, has eliminated short-term policy uncertainty and clarified the framework for long-term interest rate pricing. Concurrently, U.S. bond yields have declined as the market anticipates increased likelihood of Federal Reserve easing and as the dollar has weakened amid advancements in resolving the U.S. government shutdown.