Fynsa
After the scenario proposed by the IPoM in June, we have to accept the reality, which is that the convergence of inflation to the target is delayed by about 2 years, Fingers crossed that the second round effects on inflation of the increase in electricity tariffs will be limited, and that the exchange rate will not slip again (which is a risk we will continue to live with).
Given the increase in electricity tariffs (around 57% for households and 39% for (around 57% for households and 39% for companies), the Central Bank went from projecting expected inflation of 3.8% in the March IPoM to 4.2% for this year in the June IPoM. in the June IPoM. By 2025, inflation is expected to rise from 3.0% to 3.6%, with a possible stabilization at 3% in 2026. In other words, the Central Bank's baseline scenario projects a total increase in inflation of 1%.
But these are the Central Bank's projections. In our case, we believe inflation would end 2024 at 4.9% and 2025 at 3.8%, above the IPoM update.
This, together with the Fed's upward correction of its FED funds rate expectations, at least for this year, (SEE MORE), will maintain the attractiveness of the short end of the curve and its expected yields, especially in UF instruments, helped by capital gains and upward adjustments in the UF curve.instruments, helped by capital gains and upward adjustments in inflation expectations.
A recurring question these days, given the rise of longer rates and a steepening yield curve, is why not take on more duration risk?
With the avalanche of issuance to come in the second half of the year around US$10,000 MM (under presumably less favorable conditions than at present) and the volatility that will continue to exist in the U.S. long rates, any option to lengthen duration is ruled out, or at least further postponed, in our opinion.
Although the level of long rates is high, the risk of negative short term yields is much higher, and the increase in electricity rates and higher projected inflation increase the demand for UF indexed instruments with terms up to 2 years.The increase in electricity tariffs and higher projected inflation increase the demand for UF adjustable instruments with maturities up to 2 years, which is the best way to "earn" the new projected inflation and with a "lower market risk".
Moreover, a duration of around 2 years should, in our opinion, be the "natural recipient" of the OW in financial intermediation (time deposits and money market) that the market currently exhibits. (time deposits and money market) that the market currently exhibits, and we recommend a gradual transition to riskier assets.and we recommend a gradual transition to riskier assets.
Considering the above, our Fynsa Deuda Chile Fund has a duration of around 2 years, 95% of its assets in UF, very good credit quality (AA) and a portfolio accrual of 3.1% in UF. and a portfolio accrual of 3.1% in UF, so we believe that it is well positioned for the We believe it is well positioned for the remainder of the year, especially considering the upcoming bids to be made by the Treasury, which will continue to generate volatility in funds with longer durations.
For more information about this fund, we invite you to review the following link link.
