FX.co ★ Brazil 10-Year Bond Yield Hits Over One-Year High

The yield on Brazil’s 10-year government bond climbed to 14.5% in mid-May, its highest level in more than a year, as political uncertainty and inflation concerns intensified. Markets reacted to reports alleging links between Senator Flávio Bolsonaro—one of the leading contenders in Brazil’s October presidential election—and Daniel Vorcaro, the owner of failed lender Banco Master, who has been charged with fraud. Investors judged that these allegations could weaken Bolsonaro’s candidacy, currently seen as the main challenge to President Luiz Inácio Lula da Silva.

Vorcaro was jailed in March on accusations of bribing a former central bank director. At the same time, inflation risks continued to bolster expectations that interest rates will remain elevated. In the minutes of its latest meeting, the Central Bank of Brazil underscored persistent inflationary pressures, noting that the conflict in the Middle East has pushed up energy prices and threatens to transmit higher costs across the broader economy.