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Chilean Inflation-Linked Yields Fall; Peso Little Changed

Chilean inflation-linked bond yields fell to the lowest in six weeks on speculation that rising commodity prices would push up prices for imports.

Two-year inflation-linked bond yields fell five basis points, or 0.05 percentage point, to 2.75 percent today, the lowest since November. Two-year breakeven inflation rose to a three-month high of 2.77 percent. Breakeven inflation, which is derived from the yield gap between fixed-rate and inflation-linked bonds, is an indication of traders’ expectations for the future pace of price increases.

“We’re seeing a pick-up in inflation and demand for deposits in unidades de fomento,” Chile’s inflation-linked accounting unit, said Sebastian Ide, head of trading at Banco de Chile in Santiago. “There is continued pressure from oil and this year has been good for commodities like rice and cotton.”

Chile’s state-owned oil refiner, Empresa Nacional del Petroleo, today announced that wholesale premium gasoline prices for the seven days starting tomorrow will be 0.5 percent higher than the current week. The price of premium gasoline has already risen 6.3 percent since Dec. 26, according to the refiner.

West Texas Intermediate crude oil held near its highest since September. Chile relies on imports for almost all its oil and gas needs.

Chilean inflation slowed last month to 1.5 percent, the lowest since June 2010.

The peso was little changed at 474.98 per U.S. dollar at the close in Santiago.

International investors in the Chilean peso forwards market maintained their short peso position at $3 billion on Jan. 14, close to the 16-month low reached Jan. 13. Local investors had a $13.3 billion long peso position, the smallest since October 2011. A short is a bet an asset will decline.

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