Brazil Rates and the BCB: Selic, DI Curve, Fiscal — 2026-10-30
Brazil’s financial markets experienced extreme volatility following President Lula’s re-election, with the real plunging to near R$5.40 and DI futures spiking by nearly three percentage points. In response, the National Treasury executed a massive US$5.9 billion bond buyback over two days to stabilize the yield curve, while the government signaled new fiscal tightening measures to restore credibility.
Brazil Rates and the BCB: Selic, DI Curve, Fiscal — 2026-10-30
Top developments
Treasury Intervenes with US$5.9 Billion Bond Buyback
The National Treasury bought back approximately US$5.9 billion in inflation-linked bonds (NTN-Bs) over two days, including US$3.1 billion on Tuesday, to counteract the sharp rise in interest rates triggered by election uncertainty. This intervention aimed to ease market stress after yields spiked, with the Treasury also suspending regular auctions to address temporary dysfunction.
DI Futures Spike and Partially Retreat
DI futures recorded a historic surge on October 26, with some contracts jumping nearly three percentage points as investors priced in a significant risk premium and a steeper yield curve. By October 27, rates retreated partially, with the January 2028 contract falling to 14.41% from 14.822%, aided by the Treasury’s buyback operations.
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Mortgage Rates Surpass Selic
As a direct consequence of the market stress, commercial banks raised lending rates sharply. Bradesco’s minimum home-loan rate reached 15% per annum on October 26, exceeding the current Selic rate of 13.75%. Itaú followed suit on October 29, lifting its rate to 12.95%, signaling a potential pause in the credit cycle.
Fiscal Framework Adjustments Proposed
The Ministry of Finance is preparing to propose changes to the fiscal rule to accelerate adjustments and slow spending growth. The government aims to pass a law allowing it to target the center of the fiscal goal more strictly, which would increase the base of expenses subject to contingency.
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Local view
Local media outlets like Valor Econômico and O Globo highlight the "risk premium" added to the yield curve, noting that the term structure steepened aggressively due to fears of fiscal loosening under the new mandate. Analysts point out that while the Treasury’s intervention stabilized the immediate market, the long-term trajectory of DI futures remains sensitive to the government’s upcoming fiscal announcements and ministry appointments.
Context & numbers
- Selic Rate: Currently held at 13.75% p.a., with market bets on a hold for the November 4 meeting rising to 69%.
- Real Exchange Rate: The USD/BRL pair closed at R$5.3878 on October 29, after hitting near R$5.40 earlier in the week, reflecting ongoing volatility.
- Bond Yields: The Tesouro Prefixado 2032 opened at 15.78% on October 26, surpassing the March 2020 spike, before closing at 15.50%. Long-term IPCA+ bonds saw real yields approach 8%.
- Fiscal Deficit: The primary deficit accumulated through the year stands at R$90.2 billion, despite a R$4.8 billion surplus in September.
On the radar
- Copom Meeting: The Central Bank’s next decision is scheduled for November 4, with markets pricing a high probability of a rate hold.
- Fiscal PEC: Rumors suggest the government is preparing a Constitutional Amendment (PEC) to reinforce fiscal targets and reduce subsidies, which could be announced in the coming weeks.
- GDP Forecasts: Industry group CNI cut its 2026 growth forecast to 1.6%, citing the drag from high interest rates.
This content was collected, curated, and summarized entirely by AI — including how and what to gather. It may contain inaccuracies. Crew does not guarantee the accuracy of any information presented here. Always verify facts on your own before acting on them. Crew assumes no legal liability for any consequences arising from reliance on this content.
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