The yield on Brazil’s 10-year government bond fell to 14.2% in late May, retreating from the highest level in over a year as global bond markets stabilized. Investors continued to monitor developments in peace negotiations between the US and Iran. With Pakistan acting as mediator, both sides moved somewhat closer to a potential agreement, although disagreements over Tehran’s uranium stockpiles and control of the Strait of Hormuz continued to prevent a final deal. Domestically, markets assessed another increase in inflation and Selic rate forecasts in the Focus survey, alongside the March contraction in the IBC-Br economic activity index. Investors also evaluated the implications of US monetary policy after comments from Federal Reserve Governor Christopher Waller reinforced expectations that US interest rates could remain elevated for longer.

Brazil 10-Year Bond Yield Retreats

The Mexican peso traded near 17.3 per USD in late May as markets monitored developments in peace negotiations between the US and Iran while digesting key domestic economic data. With Pakistan acting as mediator, the US and Iran moved somewhat closer to a potential agreement to end the conflict, although disagreements over Tehran’s uranium stockpiles and control of the Strait of Hormuz continued to prevent a final deal. Domestically, investors assessed revised GDP data showing Mexico’s economy contracted 0.6% quarter-on-quarter in Q1 while expanding just 0.2% from a year earlier. Inflation also slowed more than expected in the first half of May, though it remained above the central bank’s target, with annual CPI easing to 4.1%. The developments followed Moody’s downgrade of Mexico’s sovereign rating to “Baa3,” the lowest investment-grade level, and S&P Global Ratings’ decision to revise the outlook on the country’s “BBB” rating to negative.

Mexican Peso Holds Near 17.3 per USD

he Brazilian real weakened to 5.02 per USD in late May, broadly in line with other emerging-market currencies, amid a more hawkish stance from the US Federal Reserve. Rising geopolitical uncertainty in the Middle East also fueled risk aversion and supported the US dollar. Additional pressure came from comments by Federal Reserve Governor Christopher Waller, which reinforced expectations that US interest rates could remain elevated for longer. Domestically, the weakening political position of Senator Flávio Bolsonaro continued to weigh on the real, as markets had expected the opposition to remain competitive in this year’s presidential election.

Brazilian Real Weakens on Hawkish Fed and Political Concerns

The Central Bank of Paraguay kept its benchmark interest rate unchanged at 5.50% during its May 2026 meeting. Policymakers noted that markets expect the US Federal Reserve to raise interest rates early next year. In commodity markets, oil prices remained highly volatile amid geopolitical tensions in the Middle East, while soybean, corn, and wheat prices increased due to adverse weather, higher production costs, and stronger global demand. Domestically, Paraguay’s Monthly Economic Activity Indicator grew 8.2% year-on-year in March, supported by services, manufacturing, and the primary sector. The Business Turnover Estimate also rose 9.2%, reflecting stronger sales across several categories. Meanwhile, consumer prices increased 0.8% in April, mainly driven by higher fuel prices, lifting annual inflation to 2.3%. Inflation expectations remained anchored at 3.5% for both the next 12 months and the monetary policy horizon.

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Brazil 10-Year Bond Yield Retreats

Mexican Peso Holds Near 17.3 per USD

Brazilian Real Weakens on Hawkish Fed and Political Concerns

Paraguay Central Bank Holds Rate at 5.50%