Optimism hurts demand for safe haven assets: Chile Fixed Income


(Bloomberg) – Chile’s sovereign debt, the highest rated in Latin America, took a hit this week due to too much good news.

Optimism about the development of a vaccine, the gradual lifting of restrictions imposed to contain the coronavirus at the local level and Joe Biden’s victory in the US elections combined to generate a wave of demand for riskier assets. The safest instruments, such as Chilean sovereign debt, went in the opposite direction.

“Investors are selling assets considered more of a refuge, encouraged by the search for greater profitability in the badly punished local stocks,” said Jorge García, investment manager at Nevasa.

While the benchmark index of the local stock market, IPSA rose 5.1% last week, Treasury bonds in pesos due in 2030 fell, raising the rate by 9 basis points to 2.63%. The yield on 5-year BTPs rose 7 basis points to 1.53%.

Pfizer reported positive results for the development of its COVID-19 vaccine and President Sebastián Piñera said he hopes to have the antidote in the first months of 2021, raising hopes of ending the pandemic. And as new cases increase in the United States and Europe, Chile has avoided a second wave, allowing the government to move forward with the lifting of restrictions. Some shopping malls were allowed to accept a higher flow of people last week, while casinos and gyms were also able to reopen in some areas of the country.

But not everything is good news for Chile. Some factors are specifically affecting the bond market.

A bill that would allow people to make a second early withdrawal of their pension savings could also add upward pressure on rates. If approved, private pension funds would sell up to US $ 4.8 billion in local fixed income instruments and rates on the longest part of the curve could rise 45 basis points, according to a report by BCI economists.

The pension withdrawals will also boost consumer spending, raising inflation prospects and extending the rate hike on nominal instruments, said Marco Gallardo, deputy manager of fixed income at BICE Inversiones.

“Bank and corporate bonds in UF rated AAA and AA, and with short terms are an excellent investment alternative in the coming weeks,” said Gallardo.

The Senate could vote on the pension fund bill this week, after the Chamber of Deputies approved it last week by a large majority.


The Central Bank of Chile warned of the risks to financial markets in the scenario of a health crisis that was longer than expected and said that local corporate debt has increased 11 percentage points in one year, reaching 134% of GDP in September.

WOM has registered bonds indexed to the 10 and 30 year IPC for ~ US $ 380 million, while Global Soluciones Financieras is preparing to sell ~ US $ 114 million in bonds linked to the 10 year IPC. Enjoy also requested four new series of bonds in the context of its debt restructuring.


In Chile: Nov. 18: 3QNov GDP 18: Balance of Payments for 3QNov. 20: Bloomberg Chile Economic Study for November International: US: Nov. 16: Federal Reserve Bank of New York Empire State Manufacturing Activity IndexNov. 17 – October Retail SalesNov. 17: Industrial Production for OctoberNov. 17: Import Price Index for OctoberNov. 19: Bloomberg Economic Outlook for November China: Nov. 15: Industrial Production for OctoberNov. 15: October Retail Sales Eurozone: Nov. 18: October CPINov. 20: Consumer Confidence for November


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