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CHILE: Camara Swaps Underperforming After Hawkish BCCh Minutes

CHILE
BulletEM BulletEmerging Market News
  • Chilean rates are underperforming today, following the hawkish BCCh minutes earlier, which potentially open the door to rate hikes this year. Camara swap rates have risen by risen by ~18bp in the 2-year segment and further along curve, after central bank Board members emphasised their concern about rising 2-year inflation expectations and said they would do what is necessary to meet the inflation target. Over half of the move in yields was in reaction to the minutes, with the US CPI data then providing the additional impulse.
    • Meanwhile, the Chilean peso continues to outperform peers today, with USDCLP down 0.8%, falling to a new three-month low of 952.12. Sights remain on 940.35 next, the 61.8% retracement of the upleg between Sep 27 ‘24 - Jan 3.
    • Goldman Sachs says that the minutes reinforce the idea that the BCCh is in no rush to ease its monetary stance further. However, while the minutes certainly leaned on the hawkish side, they still believe that the bar for the MPC to rise rates is high and expect inflation dynamics to improve in the second half of the year.
    • Following the minutes, attention turns to Friday’s BCCh traders survey, which will include market participants interest rate forecasts for the comings meetings. In the previous survey, rates were seen staying on hold through March and April.
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  • Chilean rates are underperforming today, following the hawkish BCCh minutes earlier, which potentially open the door to rate hikes this year. Camara swap rates have risen by risen by ~18bp in the 2-year segment and further along curve, after central bank Board members emphasised their concern about rising 2-year inflation expectations and said they would do what is necessary to meet the inflation target. Over half of the move in yields was in reaction to the minutes, with the US CPI data then providing the additional impulse.
    • Meanwhile, the Chilean peso continues to outperform peers today, with USDCLP down 0.8%, falling to a new three-month low of 952.12. Sights remain on 940.35 next, the 61.8% retracement of the upleg between Sep 27 ‘24 - Jan 3.
    • Goldman Sachs says that the minutes reinforce the idea that the BCCh is in no rush to ease its monetary stance further. However, while the minutes certainly leaned on the hawkish side, they still believe that the bar for the MPC to rise rates is high and expect inflation dynamics to improve in the second half of the year.
    • Following the minutes, attention turns to Friday’s BCCh traders survey, which will include market participants interest rate forecasts for the comings meetings. In the previous survey, rates were seen staying on hold through March and April.