Brazil and Colombia are facing a rough year ahead as an increase in the US Treasury yields turn the bond trading market red globally.
- Bonds in the two South American countries plummeted this month and are set to underperform amid upcoming divisive elections, increased fiscal debts, and widening current account deficit.
- As the local currency bonds in some nations are likely to rebound losses, Brazil and Colombia might drop lower.
- The yield on Colombia’s 2025 local-currency bonds increased to over 8% this week from 7.4% at the beginning of the year.
- At the same period, yields on Brazil’s domestic notes due expanded past 11.50% from 10.65% before cutting back some of the moves. Only Russia performed worse amid worries over talks with the US.
- Viktor Szabo, an investor at Aberdeen Asset Management Plc in London, stated that the headlines might worsen and further stated the political noise will be high.
Investor worries could be reflected in five-year swap rates, a signal of perceived country risk.