COP: Inflows in line with CLP
In COP, we have seen outflows from HF initially in our trading session, but before we saw strong inflows in line with CLP. Price action has been very choppy and 1m implied vol moved to ~16.25% (highest among LATAM currencies).
With brent futures moving ~3% higher – the pair was trading close to 4,500, a key support level. If we break this level we will be looking at the YTD USDCOP Low of 4410. Flow wise, our local traders have been seeing mixed offshore flows.
Locally, Colombian political movement U Party declared independence from the government of Gustavo Petro, further hurting the leftist president’s power in congress after recent cabinet reshuffle. Also imports fell on a yearly basis, though the trade deficit still widened from a month ago in March.
UST sell-off continues amid more harmonious debt-limit talks, relief rally in regional US banks; NOK lags G10 peers, despite rise in Brent crude; BTPs outperform EGB peers, bull-flatten; Riksbank’s Floden defers on June meeting action; USD/CNH rises above 7.00; US 10y at 3.564% (+3.0bp).
Latin America:
Latam currencies ended marginally stronger amid a rebound in commodity prices, despite higher US real yields and a stronger USD. COP led outperformance, up 0.8% to 4494. CLP ended the session up 0.7% at 4.93, amid stronger copper prices. PEN ended the session flat at 3.70. MXN ended 0.4% weaker at 17.58, ahead of the Banxico policy meeting on Thursday.
Most local rates markets followed US rates higher, except CLPxCAM in Chile, which modestly rallied, and TIIE in Mexico, which ended largely unchanged. Colombia IBR and Brazil DI rates rose 3-5bp across most of the curve; 5y IBR ended the session 5bp higher at 8.56%, January 2026 DIs ended the session 4bp higher at 11.23%. Peru Soberanos rates rose by 1-3bp across most of the curve; 2029 yields ended 2bp higher at 6.79%. In Chile, CLPxCAM rates fell 1-4bp; the 10y CAM rate fell by 4bp to 5.27%.
Colombia: Lock-in gains on long Coltes 26s vs pay 4y US
Mario Castro, Senior Latam Strategist | BNP Paribas Securities Corp. Please refer to the end of this report for important information and MAR disclosures.
On 22 March we initiated a long Coltes 2026, pay 4y US swap position at 7.72%. As the position has moved in our favour
we set a lock-in profit level at 7.3% (current level 7.09%). We maintain the target unchanged at 6.72%.
We initiated the position as we expected to see premium reduction in the Coltes curve on the back of two main factors: 1)
a better-than-expected pension reform proposal; and 2) an expectation that local players (pension funds and banks) would
normalize their Coltes positioning (over the past few quarters their positioning had fallen below the historical average).
The above-mentioned factors have coincided with the Colombian central bank (BanRep) ending its tightening cycle (in our
base case) and inflation starting its downward trend (in annual terms), sparking a strong rally in the Coltes curve. In line
with our expectations, the market looked through the noise of the recent cabinet reshuffle and continued to reduce
premium in the curve. The reshuffle crystallized the fact that the most relevant factor for the market is congress’s ability
and desire to prevent reforms disrupting the market or the economy.