Report published September 30, 2026
The EM Trader: Brazil — Votes, Volatility and Value | Goldman Sachs Research
Goldman Sachs · September 30, 2026
Heading into Brazil's general elections, Goldman Sachs sees local rates as offering the most asymmetric risk-reward, recommending receiving the belly of the DI curve. Rate-sensitive equities and BRL also present upside potential under a market-friendly outcome, whereas tight sovereign credit spreads remain skewed toward widening.
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Finvaulta summarizes Goldman Sachs's analysis. Attribute opinions, forecasts, time-sensitive values, and chronology to the issuer and report date; do not treat this page as an independent verification or a current market-data source.
Key Takeaways
- 1.Brazilian local rates offer the best asymmetry among domestic assets heading into the general elections; the authors recommend receiving the belly of the DI curve.
- 2.A market-friendly outcome in Brazil could compress the residual fiscal risk premium in USD/BRL toward 4.80 (or as low as 4.35 to 4.50), while a fiscally unfriendly outcome could drive USD/BRL back toward 5.80.
- 3.Rate-sensitive domestic Brazilian equities and small-caps offer 2-3x rate beta at attractive valuations (10.3x P/E), presenting an attractive risk-reward via rate-sensitive stocks or short-dated call spreads.
Table of Contents
- EM Local Rates: Just Like Before, but Getting Real
- BRL: Caught Between the Macro and the Election
- EM Equities: Brazil in Focus — Current Set-up Asymmetric for Rate-Sensitives
- EM Sovereign Credit: Spreads on the MOVE, But Brazil Spreads Remain Tight Ahead of Close Elections
- Macro forecasts and outlook
- Market forecasts and valuations
- EM cross asset valuation
- Flows and Positioning
- EM Currencies
- EM Local Rates
- EM Equities
- EM Sovereign Credit
Report data
Exhibit 7: A market-friendly election outcome could drive the DI curve lower towards our fair value estimate, while an outcome with the fiscal status quo would likely push it higher – but by less, given the risk premium already priced in the curve — as of September 29, 2026.
| Metric | Estimate | Context |
|---|---|---|
| Brazil Overall Fiscal Deficit | 10.0 % of GDP | Largest fiscal deficit among EM local rates markets in Goldman Sachs' coverage. |
| Brazil Primary Fiscal Deficit | 0.6 % of GDP | Strips out interest costs from the overall deficit. |
| Estimated Fiscal Savings from Lower Selic Rate | 2.0 - 3.7 pp of GDP | Interest expense savings resulting from potential front-end policy rate easing. |
| DI Curve Macro Residual | 80 bp | Elevated level of the DI curve unexplained by fundamentals or US rate spillovers. |
| USD/BRL Spot | 5.21 BRL per USD | Current exchange rate benchmarked against 4.80 fair value and 5.80 negative fiscal scenario. |
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