FX.co ★ Brazil 10-Year Bond Yield Slumps Amid Easing Stagflation Risk

The yield on Brazil’s 10-year government bond fell toward 13.7% in early April, pulling back from its highest levels in nearly a year after Pakistani-brokered mediation between the United States and Iran largely removed the violent, stagflationary risk premium previously embedded in the curve. The decline was driven primarily by a sharp drop in crude oil prices, which substantially improved Brazil’s inflation outlook by tempering expectations for increases in administered fuel prices that had threatened to unanchor the Central Bank of Brazil’s 3% inflation target. The move was reinforced by a pronounced decline in the US 10-year Treasury yield following the announcement of a conditional ceasefire and the reopening of the Strait of Hormuz. As fears of a maritime blockade recede, market participants have shifted from pricing in an imminent increase in the 14.75% Selic rate to anticipating a more stable duration environment, as traders adjust their positioning for a possible resumption of the easing cycle later in 2026.