This is how it affects the fixed income market…

SANTIAGO – While the collapse of the Silicon Valley Bank (SVB) weighed heavily on major global equity markets; The fixed income market in Chile has been associated with downward movements in the rates of return of advanced economies Noting profits.

Although Chilean banking regulations differ from those in the United States, there is a relationship between markets, such as access to financing or investments, according to the analysts he consulted. Bloomberg Line.

in this sense, It’s common for the domestic fixed income market to react to low rates on Treasuries, said Diego Granados, head of fixed income at Zurich AGF.“waiting to see how the situation develops” internationally.

Peso-denominated Treasury notes fell between 27 and 45 basis points, depending on the duration; Whereas those denominated in UF (Unidad de Fomento) did so between 14 and 30 basis points, the economist explained.

to Joaquin Lopez, director of domestic fixed income at BTG Pactual Asset Management, as in the rest of the world, the phenomenon is known as “Fly to quality“which consists of searching for safe haven assets.

It is not news for investors to turn to bonds when riskier markets are facing high volatility. Increased demand for fixed income instruments as a haven in the face of increased volatility of risky assets It is a common behavior of investors before relevant news that can change the direction of the marketshe explains.

Granados said this behavior occurs because savers and investors, faced with concerns about possible systemic contagion, withdraw their savings and sell their holdings to avoid further losses. “These resources will be allocated to safer investments such as treasury bonds,” he added.

A distortion in perspective

Lopez points out that this greater risk aversion is due to him Change in monetary policy rate (MPR) expectations in Chilemoving from stabilizing at 11.25% over the next few months to the possibility of cuts sooner than expected.

The local market will pay attention to the decisions of the issuer, especially its performance in relation to the global financial scenario that will take place on April 4. His message will be crucial to determining the course of monetary policy.

This week, said Rosana Costa, president of the Central Bank of Chile Chilean banks have different regulations than US ones. At an academic event, the monetary policy official confirmed that, together with the Ministry of Finance and the Financial Market Committee, they are closely following the crisis caused by the collapse of the SVB.

In this order, the Chilean Financial Stability Board (CEF) met yesterday to analyze the volatility scenario for the main international stock indices, and concluded that although “Notice some changes in stock pricesA statement stated that the Chilean financial system is functioning normally and there are no disturbances in the domestic capital and financial markets.

but The outlook focuses on the world’s major economiesEspecially in the mechanisms they will use to support their financial system and provide certainty to depositors.

This has been demonstrated in recent days. When the Fed and the US government announced new emergency funds to protect SVB deposits and the Swiss National Bank gave a $54 billion lifeline to Credit Suisse, they partially succeeded. Reducing high volatility in the financial markets. Yesterday, global stock markets recovered after the Credit Suisse bailout, although tensions remain.

“The scenario from now on depends on the solidity and credibility of the measures taken by the authorities. They have to limit the problem so that it does not become systemic“They should focus on communicating that the root of the problem is the management of the banks,” Granados said.