Fynsa
The December CPI surprised the market with a 0.5% m/m drop; in this scenario we believe there is room for 100bp cuts or even a 125bp run.
For the time being, it is hard to think that the market alone will continue with rate rallies without a more committed Fed on the way to easing interest rates.
Market conditions have driven Agency MBS valuations to historically cheap levels, making them an attractive investment.
Evaluating the Central Bank's smaller cuts as a "tactical pause", we believe that these would only be transitory, awaiting a less convulsive context.
For the Central Bank, the pace of future interest rate cuts is not tied to the magnitude of the first one, thus relativizing the urgency to migrate quickly to a neutral level.
The beginning of the monetary easing cycle will accelerate the transition of portfolios from IIF to IRF. Levels and accruals enhance the value of the short end of the interest rate curve, but UF instruments gain attractiveness, especially between 2 and 5 years.
The sector continues to expand, although adjustments in occupancy and rental rates are observed.
The risk of reducing the MPR and then having to reverse it due to a misreading of the information is much higher than leaving it at 11.25% for longer than appropriate.
