Brazil 10-Year Bond Yield Hits 15%

Brazil's 10-year government bond yield climbed above 15%, its highest since early 2016, as investors weighed labor market strength, inflation data, and fiscal concerns.

The unemployment rate fell to a historic low of 6.1% in the three months to November, driven by robust consumer demand and elevated government spending.

This tight labor market has amplified expectations of sharp central bank rate hikes early next year to temper economic overheating and anchor inflation expectations.

Inflation showed slight relief, with mid-month figures easing to 4.71% in December, below the projected 4.82%.

However, the central bank's $20 billion intervention in the spot market has stabilized the real, reducing currency risk and supporting demand for reais-denominated bonds.

In 2024, persistent fiscal challenges and elevated interest rates have significantly pressured Brazilian assets, driving a more than 40% surge in the 10-year bond yield this year.