Brazil’s 10-year bond yield has climbed above 14.25%, a 10‑month high, as energy shocks from the Middle East and deteriorating fiscal credibility triggered a sharp repricing of sovereign risk. The move was intensified by the US‑Israeli confrontation with Iran, which drove Brent crude above $100 per barrel and rekindled fears of an inflationary spiral that could derail the central bank’s easing cycle.
On March 18, the Copom reduced the Selic rate by 0.25 percentage points to 14.75%, but the meeting minutes struck a distinctly hawkish tone. The committee withdrew its forward guidance as inflation expectations for 2026 and 2027 became de‑anchored.
Market uncertainty deepened after R$30 billion in betting tax exemptions and R$61 billion in mandatory parliamentary amendments, both of which prioritized higher spending over achieving primary surplus targets. The resulting yield surge forced the Treasury to conduct a record R$49.1 billion bond buyback in an attempt to stabilize the DI futures curve, yet the intervention was insufficient to meaningfully counter ongoing selling pressure.