Bond proxies offer defensiveness amid yield curve uncertainty

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Bond proxies offer defensiveness amid yield curve uncertainty

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Brazil Bond Proxies

Bond proxies offer defensiveness amid

yield curve uncertainty

Industry Overview

Macro: middle east conflict raises yield curve uncertainty 13 July 2026

The recent resurgence of the conflict in the middle east increases uncertainty for the Equity

yield curve in Brazil. Against that backdrop, some bond-proxies with low earnings risk Latin America

could be defensive in a more adverse scenario. (David Beker, Paula Soto) Bond Proxies

Utilities: Barbell positioning for rates volatility LatAmMerrill LynchResearch(Brazil)

With Middle East tensions increasing yield curve uncertainty, but recent inflation data Transportation & TMT team - Equity research

surprising positively, we adopt a barbell strategy. We prefer AXIA and ISAE on the short- Rogerio Araujo >>

duration side: AXIA offers the highest div yield in our coverage (~30% cumulative over ResearchMerrill LynchAnalyst(Brazil)

3y) and appears oversold given stable long-term power prices (4Q26+ at >R$230/MWh), +55 11 2188 4255

rogerio.araujo@bofa.com

while ISAE combines fully inflation-indexed revenues with a ~10% real IRR and potential

team - Equity researchupside to >15% if its pension liability is resolved. On the long-duration, EQTL remains Utilities >> Gustavo Faria

our top pick, combining ~12y of cash-flow duration, >3x ND/EBITDA through 2028 and Research Analyst

Merrill Lynch (Brazil)

an attractive ~12% real IRR (~14% IRR for DisCos only), with additional optionality from +55 11 2188 4295

potential power distribution M&A over the next 6–12m. (Gustavo Faria) gustavo.faria@bofa.com

Real Estate team - Equity research

Transportation: toll roads preferred VictorResearchTapiaAnalyst>>