Investors are ramping up hedges ahead of Brazil's presidential runoff as polls point to a tight race between right-wing candidate Flávio Bolsonaro and the incumbent President Luiz Inácio Lula da Silva. One-month risk reversals on the real climbed to 9%, the highest since 2011.
Sentiment has also shifted in equity markets, with investors seeking protection against a decline in the Ibovespa index. Open interest in puts has jumped, while demand for calls dropped more than 30% from the early-October peak. An Atlas Intel poll showed Bolsonaro with 51% of votes, while Lula has 49% — within the margin of error.
Bolsonaro's strong first-round showing triggered the biggest rally in Brazilian assets in years, with the real gaining as much as 5% and the Ibovespa jumping 8% in a single day. "Options became the way the market started trading such a binary scenario," said Lucca Silva, an equity manager at Persevera Asset Management.
One-month risk reversals on iShares MSCI Brazil ETF are the most expensive since Covid, and on the domestic index the put premium is the highest since April 2025. Investors expect a Bolsonaro administration to be more fiscally prudent, cutting spending and helping create room for lower interest rates.
स्रोत: Bloomberg Markets · HeadlinesBriefing द्वारा सारांशित