Brazilian Markets React to Lula's Reelection: Where to Invest in Fixed Income Now

Brazilian long-term interest rates surged nearly 3 percentage points on Monday, October 26, following Luiz Inácio Lula da Silva's reelection, with January 2035 DI futures jumping from 12.65% to 15.37%, reflecting concerns over public debt sustainability estimated at 86% of GDP for 2027. Experts advise caution and recommend maintaining at least 50% of portfolios in liquid assets while awaiting clarity on fiscal policy. Some see opportunities in long-term inflation-linked IPCA bonds, which could yield real rates near 7%, though analysts warn these carry significant short-term volatility risk. The currency opened up over 12% weaker at R$5.60, and specialists suggest avoiding corporate debt amid economic slowdown concerns. Post-fixed securities are favored, with expectations that the Selic rate will remain at 13.5% for an extended period.