The name of the asset is interesting: fixed income. In fact, it has not helped when, in more than one extended family lunch, I have been asked what I do for a living. The truth is that, apart from the coupon, fixed income has nothing fixed. Gone are the years when bonds were bought with the objective of holding them to term, where now, while liquidity is always welcome, greater uncertainty has been incorporated into investment decisions.

A good thermometer for fixed income, within the reach of any Chilean, is the E Fund of the AFPs, the "most conservative" fund, which invests between 95% and 100% in assets. In my fund manager, it accumulates a -5.97% yield so far this year. Ouch. Another good indicator is the 10-year US treasury bond (GT10), which in the last 2 weeks has had a remarkable performance, and still accumulates an increase of more than 100bps during the year.

Let's say it: those who have been invested in fixed income this year have had a hard time and are only now beginning to see the light at the end of the tunnel. But it is still too early to claim victory. The scenario is fragile and volatility is the order of the day. As hard as rates have fallen the last few sessions, we may see a quick rebound if contrary factors align. Without going any further, an escalation of the conflict in the Middle East, involving a larger number of countries, could trigger oil prices and thereby inject inflation into the vein, with a consequent effect on rates.

Now imagine the following scenario: bond in UF (indexed to inflation), with AAA rating (very low risk of default), with an annual rate of 4.5% (readjustment in UF and an additional 4.5%). And the best of all? Term 1-2 years, i.e., it can be easily carried to maturity. A return to the origins of the asset, aiming at capital preservation through real profitability, a strategy currently available with bank bonds in the local market.

Pablo Gallegos 

Assistant Manager Money Desk