Brazil’s Treasury canceled its scheduled bond auctions for Tuesday and Thursday after Lula’s reelection, and B3 separately halted trading for 30 minutes Monday when the Ibovespa’s decline hit 10%.
Brazil’s Superior Electoral Court (TSE) said Lula won 51.79% of valid ballots in Sunday’s runoff, while Sen. Flávio Bolsonaro received 48.21%. The Ibovespa’s decline later reached 17.34% intraday, Estadão Conteúdo reported, extending the market sell-off after Lula’s victory.
The Brazilian real lost close to 12% against the U.S. dollar during early local trading, Reuters reported. Brazil’s Treasury canceled two bond auctions: an inflation-linked sale scheduled for Tuesday, Oct. 27, and a fixed-rate sale planned for Thursday, Oct. 29. Reuters also reported that the sell-off hit sovereign debt. B3 widened daily movement limits for futures tied to the Ibovespa, the dollar and interest rates, Reuters said.
Markets had rallied earlier in October after Flávio Bolsonaro led the first round, Reuters reported. By Friday, Oct. 23, the real had strengthened nearly 5% against the dollar and the Ibovespa stood close to 7% above its level before the first round.
Analysts cited by Reuters warned that doubts about fiscal discipline and debt sustainability could raise government borrowing costs and make credit more expensive for businesses and households. Reuters said investors will watch Lula’s choice of finance minister in the coming weeks for a signal of his fiscal approach.
