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Bond Market News
Brazil’s Public Debt Outlook Worsens, Treasury Warns of Higher Peak
July 17, 2025
Brazil’s Treasury now expects the country’s gross debt-to-GDP ratio to rise by 10.6% over President Lula’s term, reaching 82.3% by 2026. The projection is 0.6% higher than December’s forecast, citing higher assumptions for interest rates, inflation and FX. Gross debt is now expected to peak at 84.3% of GDP in 2028, a significant revision from projected peak of 81.8% in 2027 seen seven months ago. For 2025, Reuters expects its debt ratio to rise by 2.5% to 79.0% of GDP.
Nearly half of Brazil’s debt is linked to the Selic policy rate, which has been hiked by 450bp since September to 15%, immediately raising debt servicing costs. This continued spending has kept debt burdens elevated higher than EM peers but has failed to bring down the inflation below the 3% target.
The update comes after Brazil’s dollar bonds have steadily increased over the course of the year, as seen in the chart.
Brazil’s 10.125% 2027s are down by 0.2 points at 109.8, yielding 4.43%.
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