Brazilian Government Bonds Plunging

Investor skepticism about the nation's prospects leads to the biggest quarterly bond losses since 2002.

Brazilian government bonds are suffering the biggest quarterly losses since the run-up to former President Luiz Inacio Lula da Silva’s election in 2002 led to speculation that the nation would default.

Dollar-denominated bonds from Brazil, Latin America’s biggest nation, plunged 7.55 percent since the end of March, the biggest slide since a 16 percent drop in the third quarter of 2002 before Lula’s October election that year. The loss this quarter exceeds a decline of 6.15 percent for countries with triple-B ratings, according to Bank of America Corp.

Slowing Growth

Mauro Leos, senior credit officer at Moody’s Investors Service, said in a June 19 interview that his firm’s positive outlook on Brazil is “difficult to support” amid lackluster growth and rising debt levels. Brazil’s gross debt was equal to 59.2 percent of gross domestic product in March, compared with 53.35 percent at the end of Lula’s term in December 2010.

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