Treasury Direct Rates Surge to New Yearly Highs on Inflation Fears

Brazil’s government bond market opened sharply higher on Monday, June 8, as investors continued to digest inflation concerns triggered by Friday’s stronger-than-expected U.S. payroll report. The move was led by longer-dated inflation-linked securities, while shorter and medium maturities also climbed, pushing yields back to the highest levels seen so far in 2026.

The main driver was the worsening outlook for inflation expectations. Brazil’s latest Focus bulletin reinforced that view by raising the 2026 Selic forecast to 13.5% a year and nudging the 2026 IPCA inflation estimate from 5.09% to 5.11%. The update helped confirm that markets are now pricing a more persistent inflation risk, both abroad and at home.

Among inflation-linked bonds, the longest maturities posted the biggest gains. The Tesouro IPCA+ 2050 rose from 7.19% on Friday to 7.32% on Monday, a 13-basis-point increase and the largest jump of the session. The Tesouro IPCA+ with semiannual coupons due in 2060 climbed from 7.43% to 7.53%, while the IPCA+ 2040 advanced from 7.54% to 7.64%. The shorter-dated IPCA+ 2032 also moved higher, crossing the 8% mark to reach 8.28%.

The rise in inflation-linked yields suggests investors are increasingly worried about inflation staying elevated for longer. That concern has been reinforced by several factors, including the strong U.S. labor market reading, higher oil prices amid tensions in the Middle East, and the upcoming release of Brazil’s IPCA inflation data later this week.

Economists said the domestic inflation report could be a key test for the market. Otávio Araújo, senior consultant at ZERO Markets Brasil, said the Brazilian IPCA acts as an important local counterweight, especially as expectations for 2026 inflation continue to move higher, supporting the idea that local interest rates will remain under pressure and limiting room for near-term easing. Leonardo Costa, economist at ASA, said the May IPCA may show some slowdown, but the overall quality of inflation remains weak, with persistent pressure in services and industrial goods, which keeps the short-term inflation outlook concerning.

By contrast, the move in fixed-rate bonds was much more limited, indicating that the market stress is concentrated more on long-term inflation compensation than on the short end of the yield curve. The Tesouro Prefixado 2029 increased slightly from 14.69% to 14.72%. The Prefixado 2032 moved from 14.68% to 14.70%, and the Prefixado with semiannual coupons due in 2037 edged up from 14.72% to 14.74%.

The gap between the stronger movement in IPCA+ bonds and the relative stability of prefixados highlights a market that is becoming more concerned about durable inflation risks rather than a short-lived shock. As investors wait for Brazil’s inflation data, Treasury yields remain under upward pressure, and new highs for 2026 have already been set.