HALISTER1: Chile’s Short-Term Bonds a Buy to BCI on Outlook for Rate Cuts

Chile’s Short-Term Bonds a Buy to BCI on Outlook for Rate Cuts

(Bloomberg) -- BCI says that economic fundamentals still support cuts in interest rates even after volatility in foreign and local markets, according to note.
  • BCI expects central bank to cut monetary policy rate twice by 25bps in 1Q17
  • BCI’s fair values for policy rate are below current curve
    • Fair value for 3-months at 3.33%; 6-months at 3.2%, 9- months at 3.15% and 12 months at 3.1%: BCI
  • Recommendations for swaps:
    • Increase exposure to peso swaps with duration under 2 years
    • Also recommends positions in CPI-linked UF swaps throughout the curve
  • Recommendations for bonds:
    • Short term CLP bonds attractive, neutral on long term
    • Short term CPI-linked UF bonds also attractive
  • BCI expects CLP to close at 680/USD in 2016
  • 12-month inflation to end 2016 at 2.9%, then will drop to ~2% by mid 2017 and end year at 2.8%: BCI
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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