02.09.202516:28:50UTC+00Brazil 10-Year Bond Yield Rises After GDP

The yield on Brazil's 10-year government bonds has risen to approximately 14.1% as investors reassess growth prospects and fiscal risk. The GDP for the second quarter grew by only 2.2% compared to the previous year, marking the slowest growth in over three years. Additionally, gross fixed capital formation declined by around 2.2%, indicating a cooling off in investment amidst a sustained high Selic rate of 15%, which is tightening credit conditions and dampening business activity. Persistent inflation and a consistently strong labor market complicate the potential for interest rate reductions, maintaining a restrictive monetary policy stance. Meanwhile, Brazil's public debt is projected to near 79% of GDP by 2025, with a significant portion of federal debt linked to floating rates. This linkage heightens the debt's sensitivity to interest rate changes and increases term premiums during periods of fiscal or market uncertainty.