Dollar hits R$ 5.60 and circuit breaker: the price of the turnaround
The market had positioned itself for a Flávio Bolsonaro victory. In a single morning, the Ibovespa fell more than 15%, B3 halted trading, and the curve began pricing in a Selic hike at the November Copom meeting.
The Monday after the runoff began with trading desks realizing losses. Luiz Inácio Lula da Silva’s victory over Flávio Bolsonaro caught a large share of investors off guard, and the repricing came all at once: the Ibovespa at one point dropped more than 15%, the dollar surged above R$ 5.50, and Interbank Deposit (DI) rates rose more than 300 basis points in the first moments, according to Reuters’ reporting.
The spot dollar touched R$ 5.6048 at its daily high and was up 8.74%, at R$ 5.4291, at 11:51 a.m. (Washington time, Coordinated Universal Time (UTC)-4). Around 2:30 p.m., the gain stood at 8.44%, at R$ 5.4142, according to G1, Globo’s news portal, in a report dated October 26, 2026. The Ibovespa, which had closed Friday at 205,083 points, halted trading for 30 minutes in the opening moments of the session and resumed trading down more than 17%; around 1:30 p.m. (Washington time, UTC-4), it was down 14.88%, at 174,568 points, after touching a low of 169,516.
What the exchange and the Treasury did
The mechanism that suspends trading during a steep drop was triggered right at the open. B3 (Brasil, Bolsa, Balcão) also raised, in two steps, the upper limit on dollar futures contracts, from 6% to 8.4% and then to 12%, and lifted the limits on DI rates, halting trading at several moments so the market could find equilibrium prices.
The National Treasury acted the same day. It canceled Tuesday’s auction of inflation-linked bonds and Thursday’s auction of fixed-rate securities, kept the Treasury Financial Bills auction, and, late in the morning, held an extraordinary buyback auction of fixed-rate bonds worth about R$ 7.1 billion. A total of 49.3% of the lot of 15 million National Treasury Notes, Series F (NTN-F), was bought back, according to Valor Econômico, which recorded an increase of up to 2.85 percentage points in futures rates at one point in the session: the DI for January 2029 jumped from 12.64% to 15.27%, and the January 2031 DI from 12.64% to 15.49%.
The price is Brazilian
Abroad, the day was all about risk appetite. The S&P 500 was up 0.94%, the Nasdaq 1.27%, and the ten-year Treasury yield had eased from 5.001% to 4.987%. The Brazilian move did not follow the outside world: it handed back, in a single morning, what domestic assets had gained in the euphoria after the first round, when Flávio led Lula in the polls.
On Friday, the last session before the vote, the dollar had fallen 0.90%, to R$ 4.9930, and the stock market had gained 0.47%. The positioning was clear: a significant part of the market believed a Flávio victory would increase the chances of greater control over public accounts, even though the candidate and his economic spokespeople had presented no concrete adjustment proposals throughout the campaign, as Reuters itself noted.
With the reelection, long-end rates rose and risk premiums moved above the levels seen before the first round.
A political bet became, in a single morning, the price of debt — and the curve the Copom will face in November 2026 changed direction in a single trading session.
The Monetary Policy Committee (Copom) that inherits the bill
At the short end, the repricing changed direction. Late in the morning, the curve was pricing roughly a 75% probability of a 25-basis-point Selic hike at the November 2026 Copom meeting, versus a 25% chance of no change. Before the runoff, there had been a near-100% probability of a 25-basis-point cut. The curve also came to project hikes of 50 basis points in December 2026 and 25 basis points in January 2027. The Selic stands at 13.75%.
The Focus Bulletin released on Monday, October 26, 2026, offers no guidance: projections were collected through Friday, before the vote, and showed inflation of 5.19% in 2026, 4.34% in 2027, and 3.75% in 2028, with the dollar at R$ 5.05 at year-end. All of them will be revised under the government that takes office in January 2027. For analyst Lais Costa, of Empiricus Research, the new pricing on the Selic is explained by the dollar above R$ 5.50, which pressures inflation, and by the deterioration in expectations.
The Copom will decide at its November 2026 meeting facing a dollar no one had projected and a curve that now demands the opposite of what it demanded days earlier. The question the week leaves open is whether the committee confirms the hike the market now demands, and how many of those who got the election wrong will bill the Central Bank for the cost of their own bet.