Brazil’s government bonds could become an “oasis” for some investors, analysts told CNBC, particularly as global trade tensions fester.
The bond market of Latin America’s largest economy is driven more by idiosyncratic factors such as fiscal policy and inflation outlook rather than by global sentiment, said Viktor Szabo, investment director on the emerging markets debt team at abrdn.
Brazil’s 10-year government bond yield currently stands at 15.267%, marking a more than 40% jump compared to a year ago, data from LSEG showed.
“Brazil offers one of the highest real rates of all government bond markets,” Szabo said.
Its yields are significantly higher compared to other emerging market counterparts. For example, yields on Chile’s 10-year government bond yields are hovering around 5.939%, while Mexico’s 10-year government bond is around 9.487%.
A cocktail mix of sticky inflation and uncertainty over the Brazil’s fiscal outlook are the main drivers for the country’s high yield, especially in recent months, market watchers told CNBC.
“Over the last five years, Brazil has been at the bottom of the Latin America league table, slightly ahead only of Chile and Colombia,” said Gustavo Medeiros, head of research at Ashmore Group, an investment management firm dedicated to emerging markets. Medeiros added that Uruguay and Mexico offered the best total returns over the past five years.
