Brazil’s 10-year government bond yield rose to around 12.94%, up from the two-year low of 12.60% reached on October 5th, as bonds came under pressure amid a narrowing lead for Flavio Bolsonaro over President Lula in runoff polls. Recent surveys reinforced the perception that the incumbent has gained momentum in recent days, prompting investors to reprice risk premiums across the yield curve. Although Flavio Bolsonaro has yet to present detailed policy plans, investors view him as more likely to pursue fiscal reforms, including spending cuts, which are seen as essential to lowering interest rates. Questions also remain about the fiscal discipline of a potential Flavio administration. Political pressure has already prompted the candidate to change his position and support ending the six-days-on, one-day-off work schedule, which the Senate approved yesterday. In addition, the amendment’s approval is also being viewed as a political victory for Lula’s government.