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As the CPI fell, interest payments on the bonds would decline because the fixed-coupon rate would be applied to a smaller principal amount.
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(When bond prices fall, interest rates rise).
When the deficit began to fall, interest rates did too.
By contrast, holders of government bonds did rather well, as falling interest rates lifted prices.
The switch back to falling interest rates has weakened the krona and pepped up exports.
Moreover, weakness on Wall Street and falling interest rates would bring some benefits.
Housing usually leads the way out of recession as falling interest rates unleash pent-up demand.
Meanwhile, falling interest rates will bring an end to the slowdown in the emerging world.
The recent rout follows several years of generally falling interest rates and comfortable bond returns.
But in the meantime, falling interest rates have made bonds more attractive.
Until March, Brazil was enjoying steady growth, low inflation and falling interest rates.
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