Brazil’s budget imbroglio, Andean election surprises

The recent fiasco with Brazil's 2021 budget, which will have to be approved next week, suggests that commitment to fiscal support is fraying. This has resulted in a higher risk premium on Brazilian bonds, and adds to the reasons to expect further monetary tightening in the coming months. Elsewhere, investors were clearly relieved by the outcome of Ecuador's election, but it will be a tough ask for incoming President Lasso to keep bondholders onside. Meanwhile, Peruvian financial markets have struggled on the back of the surprising election outcome there.