On previous occasions we have talked about how the constant reductions in the constant reductions in the MPR and what could happen to the time deposit market. At the last Monetary Policy Meeting, the regulator decided to pause and keep the rate at 5.75%, accentuating the migration of this asset and the search for different savings and investment tools, which yield better returns or have better characteristics.

A very conservative alternative, which this year in particular has had high income, due to the outflow of deposits from banks (US$ 290 million in the first half of the year), is undoubtedly that of mutual funds. Mutual Fundsespecially Money Market and shorter UF funds (Dur 1 to 3Y).

These have the particularity of being invested in debt instruments, such as promissory notes, bonds or time deposits. they are invested in debt instruments, such as promissory notes, bonds or time deposits, with the characteristic of being redeemable at any time, in addition to providing diversification with respect to putting all the eggs in the same deposit, where they are punished with the interest earned.

It is at this point where we see a deposit market losing strength, with a flat curve, showing itself diminished and with participants with no needs that provide attractive levels for re-engagement. Only sales that seek to make profits (pass through the till) in areas close to the end of the year (120-200d).

Thus, the UF is extremely attractive, given the certainty that the U.S. Federal Reserve will begin to cut rates. UF funds -taking advantage of the inflationary scenario in short duration- are ideal for hedging, which is leading some of them to historical growth, tripling or quadrupling their contributions compared to previous years, and some are still growing (Info Risk).

In view of such contributions and looking for better yields offered by banks (0.40- 0.45), it is logical that investors migrate to areas with higher yields, where UF Bonds are attractive because they have more liquidity and are safer in case of eventual investors migrate to areas with higher yields, where UF bonds are attractive because they are more liquid and safer in the face of possible shocks. shocks inflationary shocks, taking advantage of the accrual of the UF and -at the same time- the fall in interest rates (accrual 0.7 approx.). Bonds with a good rating (AAA; AA) are the ones to which the market is inclined, looking for quality and facing the avalanche of incoming money.

Victor Valenzuela
Money Desk Operator
Fixed Income / Domestic Financial Intermediation Instruments