In our last publications, we asked ourselves: Would the regulator (BCCH) continue to make other pauses? Now that we know the trajectory of the interest rate reductions, which in the last RPM clarified that it would continue with the cuts, we ask ourselves another question: Should we migrate to UF?

Let us recall a little, the Central Bank of Chile paused in its race to reduce the interest rate at that minute, being consistent with the message that had been delivered in the Monetary Policy Report (IPoM) when it estimated that. -in the short term- inflation would pick up, mainly due to the inflationary effect of the increase in electricity tariffs. After the pause, and in line with subsequent sentiment, the issuer decided to resume reductions at a time when the economy is showing signs of greater weakness, bringing it to current levels of 5.25.

It is here where the UF, especially short-duration bonds, takes on greater relevance, leaving behind times when deposits (as safe investments) were attractive and welcoming the migration to the UF.

This is because it is a very conservative savings alternative in the face of the outflows from the banks (US$ 290 million in the first half of the year). (US$ 290 million in the first half of the year).

Mutual funds, especially Money Market and short-term UF funds (with durations of 1 to 3 years), are gaining popularity. These funds invest - above all - in bonds with good ratings (AAA; AA), as the market is looking for quality and security in the face of the large amount of money coming in.

What does a strategy in short durations provide at the present time?

On the short side throughout this 2024, we believe that they still present an attractive alternative for the conservative investor, as they are strategies that we believe are safe and attractive for the rest of the year. Inflation in the coming months (October and January) will give a good Carry, as a result of what is left of the electricity tariffs, causing an appetite for short UF paper, which we believe is safe and attractive for the rest of the year., as the real rate is still high and the UF+ 3 levels are an entry point in the face of low TPM. This, as the Regulator will continue to reduce, converging to neutral by 2025.

Another point to take into consideration is the elections in the United States, where the market remains attentive, waiting to see how the world's largest economy will proceed.

Depending on who wins, geopolitical tensions could harden, as both candidates seek to end the war as soon as possible, and a tightening of measures is not ruled out, which would cause fluctuations in the exchange rate, as the dollar is the reference currency in global markets, especially Chile's relationship with international trade, dominated by copper exports.

Victor Valenzuela

Fixed Income / Domestic Financial Intermediation Instruments Operator