Peso GS Trade Idea: Is it time to lock in gains?
Following the recent rally in global and local bond markets, we see an opportunity to shift to our top short-term bond picks while waiting for the primary auctions early next year.
Markets have celebrated the shift in tone by the US Federal Reserve—from talking tough and doubling down on the higher-US-rates-for-longer message in November, to telegraphing that a pivot could be underway even earlier than anticipated.
US Treasuries have rallied quite significantly, with the 2-year US yield lower by as much as 88 basis points (bps) and the 10-year yield lower by 110 bps since the Fed’s peak hawkishness in mid-October. With the rally in global yields, the past year has also been good to holders of long-dated peso government securities (GS).
Late October, we flagged an opportunity to buy long-term peso GS with tenors of 10 years and beyond as the local market tracked the sell-off in global yields. Our trade recommendation came out around the time when US 10-y