Mantega Trumps Serra as Tax Fuels Bond Rout: Brazil Credit

Brazil’s longest-maturity fixed-rate bonds are tumbling the most on record this week as a tax increase on foreigners squelches a surge in demand sparked by opposition candidate Jose Serra’s advance in presidential polls.

Yields on the government’s bonds due in 2021 rose 49 basis points, or 0.49 percentage point, the past three days to 11.98 percent after Finance Minister Guido Mantega boosted a tax on foreigners’ purchases of local fixed-income assets for the second time this month to curb gains in the currency. The rout reverses a rally last week sparked by polls showing that Serra, who has pledged to be fiscally “responsible,” was gaining ahead of an Oct. 31 vote.