2025.12.0813:42:12UTC+00Brazil 10-Year Bond Yield Surges After Election Shock

The yield on Brazil's 10-year government bond has shot up to over 13.55%, rebounding from recent lows, following an unexpected political development that has heightened short-term fiscal uncertainty and significantly increased funding costs. Reports suggesting that Jair Bolsonaro might support his son Flávio in the 2026 election dashed hopes for a moderate, market-friendly opposition. This news immediately pushed DI futures up by more than 20 basis points, prompting dealers to offload longer-dated securities, thereby increasing the term premium on sovereign bonds. The domestic economic backdrop further complicated the situation, as third-quarter GDP rose by only 1.8% year-on-year—the slowest growth in over three years. While this leaves room for potential monetary easing, it fails to mitigate the immediate blow to fiscal credibility and risk premiums. Concurrently, a firmer global outlook added pressure, as yields on longer-term securities abroad increased following hawkish signals from European and Japanese central banks.