Brazil's 10-year government bond yield dropped to below 14.7%, easing from its peak of 15.31% on January 2nd, driven by investor optimism over the country’s improving fiscal outlook, particularly boosted by rising tax revenues. Federal revenues surged 11.21% in November 2024, supported by higher taxes on fuel, imports, and corporate income, which bolstered confidence in Brazil’s fiscal stability and reduced fears of immediate fiscal tightening. Despite inflationary concerns and currency market volatility, investor demand for Brazilian assets has remained strong due to expectations of fiscal discipline and the central bank’s likely move to tighten monetary policy in 2025. Political uncertainty, including President Lula’s veto of provisions in the 2025 Budget Guidelines Law (LDO), has added some market hesitation, but the positive tax revenue outlook has helped mitigate broader concerns.