Not Even World’s Highest Rates Keep Foreigners in Brazil Bonds

bonds

Non-resident holdings of local notes have dropped to the lowest level this year amid growing speculation that President Dilma Rousseff won’t be able to fulfill promises to reduce government spending and shore up finances. Her pledge Monday to shut down 10 ministries and sell properties to raise cash failed to reverse a selloff in risky assets that sent yields on the country’s 10-year debt to a record 14.18 percent.

Foreigners are souring on Brazil as analysts forecast the longest recession since the 1930s amid a sweeping graft scandal at the state-run oil company and a political crisis that has included calls for Rousseff’s impeachment. Inflation is still running above target after policy makers raised interest rates seven times since October, and concern the country’s credit rating may be cut to junk has sent the real tumbling.

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