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Brazil’s interest-rate future yields rose after Banco Itau Holding Financeira SA, the country’s second-biggest non-government bank, boosted its forecast for central bank interest-rate increases.

Central bankers will lift the benchmark overnight rate to 13.75 percent by year-end, Itau said in a report. That estimate is 1 percentage point more than Itau’s earlier forecast and half a point more than the median estimate in a central bank survey of about 100 analysts. Policy makers raised the benchmark rate a half-point to 11.75 percent last month, the first increase in three years, to curb inflation.

“A lot of people are realizing they have to adjust inflation and interest-rate forecasts because price indicators have been so bad,” said Reginaldo Galhardo, foreign exchange manager at Treviso Corretora de Cambio in Sao Paulo.

The yield on Brazil’s interest-rate futures contract for July delivery rose 3 basis points, or 0.03 percentage point, to 11.94 percent. Central bankers are next scheduled to meet to set the overnight rate target on June 3-4.

“Brazil is ideally placed to cash in on the secular commodities boom,” says Merryn Somerset Webb in Money Week. However, she warns that “Brazil will not be immune to a likely relapse in global markets amid fears over the American and global economies – note that the Bovespa index is highly cyclical, with the energy and materials sectors comprising 60% of the index.”

For investors keen to get in on high-yielding Brazilian government bonds, Gary Scott says: “You can borrow US dollars to make multi currency investments from Jyske Bank at rates a bit above and below 4.5% depending on the amount borrowed.

“You can also buy Brazilian bonds that yield around 11%. For example, earlier this month Jyske Bank offered these two Brazilian government bonds: 1) Brazil 12.5% maturing 2016 yield 10.9%, 2) Brazil 12.5% maturing 2022 yield 11.0%.”

A must read for investors seeking to take advantage of the Brazil’s growth is Gary Scott’s article: Why I Like Brazilian Bonds.

This from Gary: “You can borrow US dollars to make multi currency investments from Jyske Bank at rates a bit above and below 4.5% depending on the amount borrowed.

“You can also buy Brazilian bonds that yield around 11%. For example, earlier this month Jyske Bank offered these two Brazilian government bonds: 1) Brazil 12.5% maturing 2016 yield 10.9%, 2) Brazil 12.5% maturing 2022 yield 11.0%

“If you invest $100,000 (the minimum for a leveraged account) and borrow $100,000 at 4.5%, investing both the loan and original investment in Brazil, with $100,000 in each of these bonds…your average return after fees will be about 10%. That works out to $20,000 a year income on $100,000 invested…or 20% per annum.

“Plus, the Brazilian currency has appreciated enormously versus the U.S. dollar. This could add an extra profit.”

Read on to find out the potential downside to investing in Brazilian government bonds and how much risk this investment carries.