14.08.202621:24:25UTC+00Brazil 10-Year Yield Nears One-Month High

Brazil’s 10-year government bond yield climbed to 14.9% in mid-August, approaching a one-month high, tracking the move higher in US Treasury yields. The increase in US yields was driven by rising inflation expectations.

Domestic risk perception has also deteriorated as the October presidential election draws nearer, adding to the upward pressure on yields. Markets are increasingly pricing in uncertainty over the next administration’s economic agenda, particularly its ability to deliver a coherent and credible fiscal adjustment. These concerns are being reflected in a higher risk premium on Brazilian assets.

Fiscal worries remain elevated amid indications of stronger government spending and potential pressure on revenues stemming from new US tariffs. At the same time, the Copom has signaled a cautious stance toward additional interest rate cuts.

On the macroeconomic front, Brazil created a net 145,161 formal jobs in June, significantly above the consensus forecast of 115,000. The stronger-than-expected labor market performance underscores its resilience and supports the view that monetary policy will need to remain restrictive for longer.