Brazilian assets struggle to contain selloff in febrile markets
LONDON, Dec 18 (Reuters) -Brazil's real struggled to claw back some of its hefty losses on Wednesday and the cost of insuring exposure to its debt lingered near a 14-month high with markets febrile as Latin America's largest economy faces a deepening financial crisis.
Brazilian assets from stocks to bonds and its currency have found themselves in the crosshairs of investors, who have been doubtful whether lawmakers would be able to pass the main part of a fiscal bill aimed at putting government finances on a more sustainable footing.
The lower house of Congress late on Tuesday approved the main text of a bill but has yet to vote on some amendments proposed by lawmakers.
The real slipped 0.7% to 6.14 cents from Tuesday's close, struggling to stay off the record weak point of 6.2092 it had hit on Tuesday, LSEG data showed. The currency has weakened more than 20% since the start of the year. BRL=
Five-year credit default swaps, reflecting the risk of default for a country on its debt, stood at 188 basis points, according to S&P Global Market Intelligence. The swaps had broken above the 190 bps level on Tuesday, the highest since October 2023. BRGV5YUSAC=MG
The dollar-denominated MSCI Brazil index has fallen more than 30% since the start of the year. .MIBR00000PUS
"The core problem is a perennial one: the government does not have a convincing policy to rein in the primary fiscal deficit and reduce high gross government debt," said Hasnain Malik at Tellimer.
Brazil's nominal budget deficit, including interest payments on public debt, has climbed to 9.5% of GDP from 4.6% when President Luiz Inacio Lula da Silva took office in January 2023.
Reporting by Karin Strohecker; Editing by Andrew Cawthorne
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