Risk appetite got a boost after tepid underlying consumer prices data from the United States on Wednesday eased concerns about a likely surge in inflation from large stimulus packages, which had hammered markets in recent days.
Brazil's central bank said it would sell up to $1 billion in currency swaps on Thursday, extending its recent intervention in the foreign exchange market to support the depreciating currency.
The fear is that, with Lula's specter hanging over his re-election, Bolsonaro could act even more erratically and take populist actions that compromise Brazil's fragile fiscal situation.
With US Treasury yields stabilizing and Wall Street's stock indexes opening higher, Sao Paulo's Bovespa stock index rose 0.2%, after sinking 4% on Monday.
Brazil's real rose 0.5% against a stronger dollar. A survey on Monday showed the pace of expansion in the country's manufacturing sector picked up again in February after three months of deceleration.
MXN bonds were the most sensitive during the 2013 & 2016 yields spikes and will likely be hit relatively more as US yields rise.
The peso weakened 1%, with markets also keeping an eye on manufacturing hit by a deep freeze in Texas.
The dimension of the effects at the national level can be significant for the industry, as it comes at a time when the (Mexican) economy is just starting to recover.