Bloomberg News

Chile CPI Estimates Climb Before Data Release: Santiago Mover

February 07, 2012

Feb. 7 (Bloomberg) -- Chilean traders’ inflation expectations rose, while interest-rate swaps reached the highest since August, before the statistics agency’s publication of January’s consumer price index tomorrow.

Traders in the forwards market for Chile’s inflation-linked currency unit are pricing in annual inflation of 4.46 percent, 0.13 percentage point more than yesterday. Prices may have risen 0.31 percent in January from December, according to forwards traders.

Traders are also pricing in a greater probability that the central bank will keep interest rates on hold after an unexpected cut in January. Two-year interest-rate swaps today climbed for an eighth straight day to the highest since August.

“The market is paying rates and buying breakeven inflation non-stop,” Alex Pigatto, a trader at Nomura Securities Inc. in New York wrote in a note to clients. “After all this move, the interest-rate swaps curve now prices in just two rate cuts of 25 basis points.”

Two-year swaps in pesos rose seven basis points to 4.72 percent. Breakeven inflation, a measure of the average future price rises implied by the swap market, rose today. One-year breakeven climbed five basis points to a seven-month high of 3.20 percent, while the two-year rate gained seven basis points to 3.08 percent.

The peso strengthened 0.3 percent to 478.55 per U.S. dollar. The currency gained further in the interbank grey market to 477.95 per dollar as of 2:40 p.m. in Santiago, according to prices from Datatec.

--Editors: James Attwood, Richard Richtmyer

To contact the reporter on this story: Sebastian Boyd in Santiago at

To contact the editor responsible for this story: David Papadopoulos at

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