The yield on Brazil’s 10 year government bond fell below 13.25% to one year lows as markets increasingly priced the prospect of looser policy after the latest GDP print. GDP rose 1.8% year on year in Q3, the weakest expansion in over three years, signaling cooling momentum and raising the odds the central bank will begin easing from near two decade high policy rates. The slowdown is broad yet gradual while a tight labour market and sustained real wage gains keep household income and tax receipts resilient, moderating near term fiscal pressure. Headline inflation eased to about 4.68% in October which reduces the case for the Selic to remain at historic highs and narrows nominal term premia. Recent fiscal revisions have trimmed perceived sovereign risk and falling US Treasury yields have lowered the global risk free anchor, encouraging carry into higher yielding Brazilian assets and helping compress local yields.