FX.co ★ Brazil’s 10-Year Bond Yield Nears Post-Election High

Brazil’s 10-year government bond yield climbed to about 15.4%, its highest level since the 15.6% mark reached immediately after President Lula’s runoff victory over Flávio Bolsonaro. Investors remain focused on fiscal policy, especially the administration’s willingness to rein in spending and stabilize public debt, which has increased sharply in recent years.

Concerns about the absence of a credible fiscal adjustment have intensified amid uncertainty over key cabinet appointments—most notably the Finance Ministry—and the broader direction of fiscal policy in Lula’s upcoming term. At the same time, major banks have raised mortgage rates as higher funding costs tighten lending conditions. In under a week, both Bradesco and Itaú announced increases in home loan rates, responding to the rise in government and corporate bond yields and heightened market volatility.

Externally, stronger-than-expected US GDP growth and accelerating PCE inflation have added to turbulence in US Treasury yields, with those moves spilling over into Brazil’s bond market and amplifying local yield volatility.