We enter 2025 with a promising outlook for local fixed income. High interest rates and high inflation expectations create a favorable environment for investing in instruments linked to the Unidad de Fomento (UF), offering interesting opportunities in the market.

In the December 2023 Monetary Policy Report (IPoM), the Central Bank projected 3% inflation for 2024. However, reality showed how wrong this estimate was: 4.5% was the inflation figure last year.

For 2025, meanwhile, the issuer anticipates higher inflation: 3.6%. This reflects a pattern of the last three years, in which we have consistently underestimated this figure and have failed to forecast higher and longer inflationary periods.

Thanks to all this context:

Looking at historical averages, we can anticipate a scenario in which the economy returns to normal. However, this is a complex scenario, given the ongoing political discussions and a market experiencing extended pauses, making it difficult to realize these capital gains.

In a scenario where bonds with a duration of 2.5 years and a yield of UF +2.55% can be found, against an inflation projected by the Central Bank of 3.6%, a yield of 6.15% would be obtained just for accruals. This could again mark a great year for local fixed income. Given this scenario, the Fynsa Deuda Chile Fund is an excellent option for 2025.

DISCLAIMER

Lukas Hernandez

Portfolio Manager Financial Funds