Brazils macro has weakened for years The fiscal imbalance is one - PowerPoint PPT Presentation

Brazil’s macro has weakened for years The fiscal imbalance is one Unemployment has of the highest worldwide sharply increased 14 Mar-98 Mar-03 Mar-08 Mar-13 Mar-18 Dec-96 Dec-01 Dec-06 Dec-11 Dec-16 Sep-00 Sep-05 Sep-10 Sep-15 Jun-99 Jun-04 Jun-09 Jun-14 12 2 2 10 0 0 8 -2 6 -4 -6 4 -8 2 -10 0 -12 Dec-04 Mar-06 Jun-07 Sep-08 Dec-09 Mar-11 Jun-12 Sep-13 Dec-14 Mar-16 Jun-17 Sep-18 Current Account Balance (%GDP) Fiscal Balance (%GDP) Source: Bloomberg, M&G, 30 June 2018 and 26 September 2018 (latest BONDVIGILANTES data available).

Real: not disliking Bolsonaro chances Bolsonaro vote intention % Real x USD (RHS) 3.95 29 4 27 4.05 25 4.1 23 4.15 21 4.2 19 Source: Bloomberg as of 26 Sept. 2018. B O N D V I G I L A N T E S

Brazilian equities YTD performance: All about the FX 120 110 100 90 80 MSCI BRAZIL USD MSCI BRAZIL BRL 70 Source: Thomson, MSCI, 27 th September B O N D V I G I L A N T E S

Brazilian corporates: feeling the real hit Petrobras Z spread BRL x USD 480 4.4 460 4.2 440 4 420 Basis points Real x USD 3.8 400 380 3.6 360 3.4 340 3.2 320 300 3 Source: Bloomberg as of 26 Sept. 2018 B O N D V I G I L A N T E S

The week ahead Monday: Final Eurozone Manufacturing PMI UK, Spain Manufacturing PMI US ISM Manufacturing Wednesday: Japan Services, Manufacturing PMI US ADP employment change Friday : US Unemployment rate US Change in Non-farm Payrolls Source: Bloomberg as of 27 September 2018. B O N D V I G I L A N T E S