Brazilian bond prices jump up to 13.02% as yields drop

Brazilian government bond prices rose sharply during the week ended October 9, driven by a broad drop in yields following the first round of the presidential election. Long-dated paper outpaced the Ibovespa stock index, which rose 8.82% over the same five sessions, according to a survey by InfoMoney using data from the National Treasury, Anbima, and B3.

The inflation-linked Tesouro IPCA+ 2050 led performance with a 13.02% gain as its market yield fell 0.53 percentage point, from IPCA + 7.14% on October 2 to IPCA + 6.60% on October 9. Tesouro Prefixado with semiannual coupons maturing in 2037 gained 10.32% as its yield fell 1.79 percentage points, moving from 14.28% to 12.50%. The IPCA+ 2040 gained 9.30% with a 0.66 percentage point drop in yield.

Shorter-dated paper lagged the Ibovespa. Tesouro Prefixado 2032 gained 8.46% as yields dropped 1.72 percentage points, IPCA+ 2032 advanced 5.28% with a 0.88 percentage point drop, and Prefixado 2029 rose 3.23% as yields dropped 1.50 percentage points. In gross terms, an investment of BRL 10,000 grew to BRL 11,302 in IPCA+ 2050, BRL 11,032 in Prefixado 2037, BRL 10,930 in IPCA+ 2040, and BRL 10,882 in the Ibovespa. The shorter maturities reached BRL 10,846, BRL 10,528, and BRL 10,323, respectively.

At Friday's official Tesouro Direto close, retail yields ranged from IPCA + 6.55% to IPCA + 6.68% on inflation-linked notes and from 12.31% to 12.51% on fixed-rate notes. The stock index rose 7.7% on Monday, October 5, before trimming gains on Tuesday, October 6, and Wednesday, October 7. The figures reflect gross mark-to-market prices; accounting for regressive financial transactions tax (IOF) and the 22.5% income tax on a one-week holding period leaves net equity gains ahead.