Second Point's active view on Brazilian local rates, BRL, and the commodity-export channel.
Brazil’s carry still rests on real support — a 14.00% policy rate against roughly 4.6% inflation — but the October election is the test, not the direction.
The carry — the yield you collect simply for holding the position while you wait — is genuinely supported here, with the Selic at 14.00% against inflation near 4.6% and real yields on inflation-linked NTN-B bonds around 7–8%. That is a wide cushion by any standard, and oil at $100 is a tailwind for a commodity exporter. EWZ has already rallied 12.8% in 30 days, so the easy part of the move is behind, but a rally does not by itself exhaust a carry trade that is still paid this well. The risk here is timing around a contested election rather than direction.
Copom meeting 15–16 September, with roughly 95% odds of a cut priced. First-round election 4 October; runoff 25 October.
A Copom hold instead of a cut would signal inflation risk that is not currently priced. A runoff result decisively outside the roughly one-point margin is the main event risk — watch the real and the 10-year yield for a break outside the 14.0–15.0% range that has held since August. Access note: NTN-B linkers are reachable via Tesouro Direto only for Brazil residents, so USD-based accounts are limited to EWZ or local-currency vehicles. One open data gap: no current-month Brazil 5-year CDS reading could be sourced, the most recent confirmed being 126bp in early July.