Bond Market in Brazil Gets Recovery Boost After December Rout

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(Bloomberg)-Money managers return to his toes to the Brazilian assets, and dollar bonds that choose cherries from companies such as Raizen and Usiminas after a deep sale process that was flowing concerns about spending plans in the country.

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The dollar bonds to Brazilian companies have delivered investors 2.2 % since the beginning of the year. This is twice the average return for corporate bonds in emerging markets during the same period.

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Local assets are recently satisfied, as US President Donald Trump turns his attention to other developing countries. Real has gained less than 8 % this year and is the best major performance in the world, according to the data collected by Bloomberg, which helps fuel a 13 % crowd in local stocks in dollars. Moreover, many Brazilian companies have benefited from debt markets this year, including Embraer SA and Ambipar Partical Emprendimantos SA and JBS SA.

This is a blatant contradiction in late 2024, when the financial markets in Brazil declined with investors Louise Insio Lula da Silva interrogated the commitment of financial austerity. The real sales process was sent to a low standard and submerged everything from stocks to local bonds and the dollar.

Sergey Dergashev, head of the start -up company at Union Investment Privatfonds GmbH, said that expectations have been improved since then. “Brazil is now less on Trump's agenda, and the risk of commercial escalation with us is relatively modest, which must be supportive of bonds,” said Dergshov.

However, fears are still existing, especially on how high interest rates for companies have higher debt levels. “The power company Raizen SA and the Usinas Siderúrgicas de Minas Gerais SA.

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The country's standard price is expected to reach 15 %, which is the highest in about two decades. The Central Bank of Brazil expects that annual inflation will remain higher than the target of 3 % for the coming months due to high food prices and high services costs, which require a more strict monetary policy.

“There are opportunities in the Brazilian Legion, but you have to be comfortable to be exposed to high local prices and probably slow them with high prices,” said Vavini.

Foreign investors tend to prefer dollar bonds because the local debt market in Brazil is dominated by local players. Disciplinary bankruptcy laws, tax organization and the risk of foreign exchange exchanges all keep international investors away from the local market.

The best risk players

Demiri Greko, chief investment official in Arkaim Adviss, said that the risk reward for investors in Brazil has improved since December. Griko focuses on companies that are not subjected to the disintegration of local currency or the risks of domestic demand. This includes exporters with revenues related to dollars and various operations outside Brazil.

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The emerging arkaim market debt fund won 99 % of its peers in the past, three years and five years, according to the data collected by Bloomberg. Griko refused to comment on any specific credits.

Trump's commercial policies are creating a new gap in the developing world, where countries are viewed towards export as more exposed to definitions. Brazilian exports to the United States constituted 12.8 % of the country's total sales in January 2025, according to the Brazilian Ministry of Commerce data. China sales, at the same time, amounted to 21.7 % for the same period.

Jennifer Gorgul, director of the debt portfolio of startups in Neberger Berman, said that Brazilian companies sell their products worldwide, with the minimum amounts that go to the United States. Gorgoll said that meat companies and other beef companies already have important operations in the United States.

“There is some insulation from the perspective of customs tariffs,” Gorgul said. “The biggest concern is the financial situation in Lula and Brazil, but there are elections next year, so it may not be re -elected.” She said Neuberger added “small exposure” to Brazilian credits with “strong basics” after the December defeat.

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Performance fears

Investors are still skeptical of a commitment without adaptation to spending. In 2024, Brazil ended with a symbolic deficit of 998 billion parishes, or 8.45 % of GDP, down from 8.84 % of GDP in 2023.

“The Brazilian bonds may provide value for its peers if the investment community becomes more comfortable in the financial situation, causing the Brazilian assets weak in December,” said Guido Chamoro, the co -head of the debt at Pectist Aseet Manjint, Ltd. He refused to comment on Pictet.

“The market started pricing some of these concerns in January and the Brazilian assets began to recover, but the finance is still an important problem,” Shamuro said.

– With the help of Vinicius Andradi, Lida Alfim and Martha Beck.

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