deepens

Allegations of misconduct between two justices threaten to pull court into political battles ahead of upcoming election.

Brazilian Supreme Court Justice Andre Mendonca has ordered the suspension of federal police chief Andrei Rodrigues and the force’s intelligence chief Leandro Almada amid growing divisions that have tested the credibility of the country’s highest court.

The suspensions were announced on Tuesday. Mendonca, appointed by former right-wing President Jair Bolsonaro, has accused Rodrigues and Almada of producing six illegal reports on the activities of justices.

The move was backed by a majority on one of the high court’s five-member panels.

But it is likely to be challenged by the government, possibly pulling the administration of leftist President Luiz Inacio Lula da Silva into a political battle ahead of October’s presidential election.

“Investigating possible evidence of crimes is correct,” Institutional Relations Minister Jose Guimaraes, a top aide to Lula, said in response to the decision on social media. “But this measure smells electoral to me. That cannot happen.”

Polls show Lula and Jair Bolsonaro’s eldest son, Senator Flavio Bolsonaro, in a tight race ahead of the first round of voting on October 4.

The Supreme Court has been roiled by mutual accusations of wrongdoing between Justice Alexandre de Moraes, appointed under centre-right President Michel Temer, and Mendonca, a Bolsonaro appointee.

De Moraes has become a prominent target of right-wing criticism, particularly after he oversaw the case against Jair Bolsonaro for plotting a coup after the 2022 election.

A report detailing possible links between de Moraes and disgraced banker Daniel Vorcaro was made public by Mendonca last week.

De Moraes, however, responded by accusing Mendonca of abusing his power, citing federal police intelligence reports and urging the court to investigate him. Mendonca has now challenged the legality of those reports.

The Vorcaro corruption scandal has widened to include powerful political figures on both the left and right.

Vorcaro was arrested in 2025 for allegedly overseeing one of the largest bank fraud schemes in the history of Brazil, leaving billions in owed money.

Flavio Bolsonaro has also faced scrutiny for his ties with Vorcaro, after he approached the banker for assistance in funding a film about his father. Jair Bolsonaro is currently serving a 27-year prison sentence.

The right-wing senator used Tuesday’s suspension to push his claim that the prosecution of his father was a political “witch-hunt”. The Federal Police had recommended charges be brought against the elder Bolsonaro in November 2024.

“Lula’s special group in the Federal Police officially unmasked,” Senator Bolsonaro wrote in a social media post. “May the honourable and glorious Federal Police regain its autonomy to go after criminals, and not Lula’s political adversaries.”

William Marcel Murad, the federal police’s executive director, released a statement saying that Rodrigues has the agency’s “full confidence” and that agents “will not be shaken by attacks”.

Borrowing costs across some of Europe’s biggest economies have surged to their highest levels in more than 15 years, as a renewed sell-off in global bond markets gathers pace.

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The global bond rout pushed Germany’s benchmark borrowing costs to a 15-year high on Tuesday, with France, Italy and the Netherlands all seeing similarly steep rises.

Germany’s 10-year Bund climbed above 3.36% on Tuesday, according to Trading Economics. Later, the yield went down a bit and traded at around 3.34%.

Bond yields move inversely to prices. When investors sell bonds, prices fall, and because a bond’s fixed interest payment becomes worth more relative to that lower price, the effective yield rises.

In short — the more bonds get sold, the more it costs governments to borrow.

Sovereign debt came under renewed pressure as rising oil prices and increasingly hawkish signals from major central banks reinforced bets that interest rates will stay higher for longer.

The yield on Germany’s 30-year Bund surged above 3.84%, also its highest level since 2011. The French 10-year OAT yield rose to its highest level since November 2008, trading slightly above 4.215% at around 10.45 CEST on Tuesday. The equivalent Italian yield was trading slightly lower at 4.188 at the same time.

At the same time, the Dutch 10-year government bond yield increased to 3.43%, its highest level since May 2011. Spain’s 10-year yield climbed above 3.80%, its highest level since November 2023.

Investors are concerned that rising energy prices will fuel inflation around the world, potentially prompting interest-rate increases by central banks in the US, Japan and the eurozone, among others.

These concerns were reinforced in the eurozone on Tuesday morning, as the latest flash inflation data from Eurostat showed that energy prices were 14.3% higher than a year earlier. This helped push eurozone inflation to 3.3% in August, up from 2.9% in July. This is significantly above the ECB’s 2% target.

The central bank is due to hold its next monetary policy meeting next week, and most investors are betting on a 25-basis-point rate hike.

Leo Barincou, senior economist at Oxford Economics, said: “With inflation still accelerating, the ECB is all but certain to hike at next week’s meeting, in line with our expectations.”

Looking at the largest European economies, analysts say Germany’s Bund has moved largely in line with global benchmarks, while France faces an additional risk premium because of its political and fiscal outlook.

French 10-year borrowing costs have exceeded Italy’s for much of the summer, as France increasingly replaces Italy as the main focus of European debt concerns.

According to the IMF, France’s gross government debt is projected to reach 118.4% of GDP this year and 120.5% in 2027. France currently has the third-highest debt-to-GDP ratio in the EU, after Greece and Italy.

The Banque de France expects the budget deficit to reach 5.2% of GDP this year. Difficult budget negotiations ahead of the 2027 presidential election have raised doubts about the government’s ability to reverse this trend.

Robert Timper, BCA’s chief fixed-income strategist, previously told Euronews Business: “We have held the view for some time that France is the country in the euro area with the most unsustainable fiscal outlook, and its borrowing cost should reflect that.”

“To get back to a sustainable fiscal path, France needs to do substantial reforms, which will be unpopular as they will curtail welfare spending,” Timper said. “A large political majority is therefore necessary for such reforms, or a bond market riot will force reforms.”

Global bond sell-off

Expectations of persistently high inflation and rising borrowing costs also pushed the yield on 10-year US Treasuries to its highest level since January 2025. The yield on the 10-year Treasury was trading at around 4.78% on Tuesday.

In the US, higher energy prices have added to already stubborn inflation, which remains well above the Federal Reserve’s 2% target. Inflation has weighed on household spending and consumer confidence, complicating the Fed’s decisions on interest rates.

According to Bloomberg, traders raised the probability of a September US rate hike to about 70%, extending a repricing that began last week when Federal Reserve Chair Kevin Warsh doubled down on a pledge to tame inflation.

The sell-off also spread to Asia, where Japan’s benchmark 10-year government bond yield reached 3.00% for the first time since 1996.

Government bonds have traditionally been seen as safe-haven assets during periods of uncertainty.

That role is being tested as investors become increasingly concerned that global conflicts and higher energy prices could produce a prolonged period of stagflation — a combination of high inflation and weak or zero economic growth.