The Brazilian financial market saw a shift in sentiment on Tuesday, with interest rates rising, especially for longer-term contracts. Investor doubts about President Luiz Inácio Lula da Silva’s government’s ability to balance public accounts grew, amidst global caution surrounding the Federal Reserve’s next steps.
By late afternoon, rates for January 2025, 2026, and 2027 increased, indicating short-term expectations for Brazil’s benchmark interest rate. Longer-term contracts also saw significant hikes, reflecting concerns about the country’s long-term fiscal health.
Monday had witnessed a reduction in risk premiums across the yield curve, prompted by reports of government measures to contain mandatory spending. Market reactions were initially positive on Tuesday but turned cautious as focus shifted to the Federal Reserve’s upcoming policy decision.
Investors expected a conservative 25 basis point cut, and the probability of a 50 basis point Selic hike in November was priced in at 92%. International markets also felt the impact, with short-term U.S. Treasury yields rising as uncertainty loomed over fiscal policy and economic stability.
As investors keep a close watch on government actions and global trends, the following weeks may provide clarity on Brazil’s fiscal direction and its repercussions on interest rates.
[ad_2]
Source link
