Brazil’s five-year Credit Default Swap (CDS), the key instrument used by foreign investors to price the risk of the country defaulting on its debt, fell to 115.6 basis points on Friday, marking the lowest level recorded during the third term of President Luiz Inácio Lula da Silva. The decline in the cost to insure against a sovereign default, which has steadily improved throughout the year, pushes the metric to its best point since February 2020, before global markets were roiled by the onset of the pandemic. This fall signals a perceived reduction in the underlying political risk premium for Brazil, directly challenging the narrative of high uncertainty that has shadowed the left-wing president since his return to office.