Brazilian DI futures and local yields jumped on Tuesday as investors priced a wider fiscal gap and fretted over unorthodox Selic-cut talk under Luiz Inácio Lula da Silva’s fourth term. The real closed near R$5.48 per dollar (USD/BRL ≈ 5.48), its weakest close of 2026, and the Ibovespa fell 1.42% into a bear market from October highs — a day before Copom held the Selic at 13.75%.
MoneyTurkey Foreign Markets Desk | 5 November 2026, 07:10 London. Tape referenced: São Paulo close 3 November; Copom statement 4 November
Key points
- Jan-2029 DI futures rose to 15.13% from 14.96%; Jan-2031 DI to 15.43% from 15.27%, with long rates up almost 40 bp intraday, Valor Econômico reported
- USD/BRL closed about 5.48 (R$5.48), up 0.79% on the day — weakest close since late December; Ibovespa −1.42% to 165,529, down about 20.8% from October highs
- Trigger: markets debated André Lara Resende’s call to cut Selic toward 7.5% within 12 months to ease debt service; Finance Minister Dario Durigan denied a Lula meeting, but Focus inflation paths worsened
The selloff was a local-language story that the major wires underplayed as a pure “fiscal fears” headline. Valor and Valor International tied the move to PT chatter around Lara Resende’s Substack proposal and to blank spots on a finance minister and a spending path — the same vacuum MoneyTurkey flagged after the runoff.
What moved
Valor Econômico said DI futures advanced firmly on 3 November as agents priced economic-policy risk for Lula 4. Jan-2028 DI rose to 14.63% from 14.485%; Jan-2029 to 15.13%; Jan-2031 to 15.43%. Intraday, the Jan-2031 contract touched 15.665%, the highest since the first post-reelection session.
NTN-B breakeven inflation also jumped: Aug-2028 breakeven +13 bp to 6.74%, Aug-2030 +13 bp to 6.87%, Valor International reported. Focus medians for IPCA 2027 rose to 4.76% from about 4.34–4.36%, and 2028 to 4.0% from 3.75%. Traders began pricing nearly 200 bp of Selic hikes through 2027 toward about 15.5%.
FX and equities
- USD/BRL ≈ 5.48 at the São Paulo close on 3 November; London morning tape on 5 November still near 5.46 after Wednesday’s Copom hold
- Ibovespa −1.42% to 165,529 — lowest close since mid-January and in bear-market territory from the October peak
- Local reports also flagged NTN-F and DI curve steepening as primary-deficit and monetary-policy doubts compounded
Why it matters
EM books already marked Brazil as high-carry, high-fiscal-risk after the runoff. A public debate that treats deep Selic cuts as a fiscal tool — rather than spending restraint — is exactly the kind of local signal that reprices the whole curve before Brasília names a finance minister. Wednesday’s unanimous Copom hold at 13.75% (see Brazil Holds Selic at 13.75%) cooled the easing bias but did not fill that fiscal blank.
What to watch
- Lula’s promised Sunday fiscal address — tone versus concrete primary-surplus steps
- USD/BRL around the 5.40–5.50 band and whether DI Jan-2029/2031 give back Tuesday’s premium
- Focus paths and any clarity on Fazenda and Banco Central appointments
Related on MoneyTurkey
- Brazil Holds Selic at 13.75% as Real Stays Weak After Lula Win
- Brazil Rate Forecasts Rise After Lula Reelection
- Brazil’s Treasury Cancels Auctions and Buys Back R$31.6bn After Lula’s Win
For information only. Not investment advice.
Sources
- Valor Econômico — DI futures advance on Lula 4 policy malaise (3 Nov 2026): valor.globo.com
- Valor Econômico — DI futures spike on economic-agenda fears (3 Nov 2026): valor.globo.com
- Valor International — Brazil’s markets sink to 2026 lows (4 Nov 2026): valorinternational.globo.com
- Valor International — Inflation expectations jump on unorthodox-policy fears: valorinternational.globo.com
- Banco Central do Brasil — Copom statement, 282nd meeting (4 Nov 2026): bcb.gov.br
