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We present a family of encodings for sequence labeling dependency parsing, based on the concept of hierarchical bracketing. We show that the existing 4-bit projective encoding belongs to this family, but it is suboptimal in the number of labels used to encode a tree. We derive an optimal hierarchical bracketing, which minimizes the number of symbols used and encodes projective trees using only 12 distinct labels (vs. 16 for the 4-bit encoding). We also extend optimal hierarchical bracketing to support arbitrary non-projectivity in a more compact way than previous encodings. Our new encodings yield competitive accuracy on a diverse set of treebanks.