23.01.202615:46:01UTC+00Brazil 10-Year Bond Yield Eases from 3-Month Highs

The yield on Brazil's 10-year government bond remained above 13.8%. This was despite improved revenues alleviating short-term funding pressure, as ongoing concerns over fiscal discipline and debt sustainability kept long-term yields near three-month highs. Tax revenues hit a record BRL 2.89 trillion in 2025. However, investors remain cautious, noting that the primary surplus target depends on accounting exceptions and off-budget expenditures, which could convert the apparent surplus into an actual deficit, thereby challenging the fiscal framework. This uncertainty is significant for yields because it increases the likelihood of expanded sovereign issuance amid a tightly contested election year, raising the term premium demanded by investors as public debt remains high at approximately 78% of GDP. Furthermore, the policy environment exacerbates these pressures, given that the central bank is expected to maintain a restrictive Selic rate for the time being, with any easing action anticipated only later in the year. This sustains high real interest rates and offers limited relief for longer-term maturities.