Brazil inflation rate dropped to 4.22%, causing bond yields to fall
August CPI deflation of 0.32% reversed a year-over-year drop to 4.22%, pushing direct government bond rates down across the board.
Public bond prices fell broadly in early Brazil on Friday as the central bank data showed inflation contraction for the month. The IBGE confirmed August prices decreased by 0.32% compared to July, a sharper decline than market models anticipated of 0.29%. Year-over-year inflation ended at 4.22%, down from 4.58% in the prior period. Consumer groups posted mixed results; personal expenditures rose 1.30% largely due to a near-20% increase in cigarette prices, while housing costs fell by 1.87% and transport expenses dropped 0.86%. Consequently, interest rates on government securities declined between 7 and 10 basis points from their Friday close. The IPCA Plus 2032 certificate suffered the steepest drop, losing 15 basis points in its real yield. Prefixable Treasury bonds also recorded losses, with maturities extending to 2037 seeing a full basis-point reduction.
