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Traders’ Hopes Dim as Brazil Dream Team Faces Fiscal Nightmare

  • Meirelles said economy in worse state than he anticipated
  • Bonds yields have soared since Temer replaced Rousseff
Updated on

Brazil bond investors are dialing back their optimism after newly appointed Finance Minister Henrique Meirelles acknowledged that the country’s fiscal problems are much worse than anyone had imagined.

Yields on government notes due in 2025 have jumped 0.55 percentage point from an almost 12-month low on May 12, when the minister took office. Since then, Meirelles -- part of a group of cabinet officials that Goldman Sachs Group Inc. dubbed a “dream team” -- has said the economy is in worse shape than he anticipated. Brazil will also face a budget deficit excluding interest payments that’s 75 percent greater than the one forecast by the previous government.