The rise in Brazilian local currency government bond yields this year is now on a scale similar to that seen during its fiscal crisis in 2015. Back then, bond yields only started to fall back when wholesale political change was on the horizon. That’s not on the cards now. Instead, a reversal of the recent spike in yields would require the government – and most of all President Lula – to convince investors that he’s committed to the fiscal tightening that some in his team are putting forward.
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