By Eirini Tsekeridou, bond analyst at Julius Baer

President Luiz Inácio Lula da Silva (PT) won the second round of Brazil’s presidential election on 25 October 2026 with 51.8% of valid votes, defeating Flávio Bolsonaro (PL), who took 48.2%. Turnout rose from 79% in the first round to around 81%, and this stronger voter mobilisation proved decisive for Lula.

After the first round in early October, markets had largely positioned themselves for a Bolsonaro victory. Lula’s win therefore points to a sharp correction in Brazilian assets and greater volatility in the near term, as uncertainty over fiscal policy persists. The government’s ability to pass legislation will depend on building a coalition in a fragmented Congress dominated by the centre-right.

Over the medium term, if the government shows a clear commitment to stabilising debt and gradually consolidating public finances, Brazilian bonds, the real (BRL) and domestic equities could perform well, given Brazil’s high real yields and still-attractive valuations. If fiscal credibility does not improve, however, the currency is likely to come under pressure and risk premiums are likely to stay high across Brazilian assets.

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