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CHILE: Fitch Affirms Rating, JPMorgan Note Alarm Bells for Fixed Income Market

CHILE
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  • Late Tuesday, Fitch Ratings affirmed Chile's long-term foreign currency issuer default rating (IDR) at 'A-', with a stable outlook. Fitch explained that ratings are supported by a relatively strong sovereign balance sheet, with government debt/GDP well below peers. The ratings also reflect solid governance indicators and a track record of credible macroeconomic policies cantered on an inflation targeting regime and flexible exchange rate.
  • Separately, JPMorgan have noted that two void local auctions over the past month are sounding the alarms around the liquidity conditions of the Chilean fixed-income market. They add that last week’s new EUR issuance, already surpassing the official hard currency debt supply target for the year, further highlights the difficulties of issuing locally.
    • While three pension fund withdrawals are to blame for lower bid-to-cover ratios in auctions, depressed trading volumes and wider bid-offer spreads, two new dynamics are currently exerting further stress in the BTP and BTU market.
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  • Late Tuesday, Fitch Ratings affirmed Chile's long-term foreign currency issuer default rating (IDR) at 'A-', with a stable outlook. Fitch explained that ratings are supported by a relatively strong sovereign balance sheet, with government debt/GDP well below peers. The ratings also reflect solid governance indicators and a track record of credible macroeconomic policies cantered on an inflation targeting regime and flexible exchange rate.
  • Separately, JPMorgan have noted that two void local auctions over the past month are sounding the alarms around the liquidity conditions of the Chilean fixed-income market. They add that last week’s new EUR issuance, already surpassing the official hard currency debt supply target for the year, further highlights the difficulties of issuing locally.
    • While three pension fund withdrawals are to blame for lower bid-to-cover ratios in auctions, depressed trading volumes and wider bid-offer spreads, two new dynamics are currently exerting further stress in the BTP and BTU market.