Chile Long-Term Swaps Hit 18-Month High Amid Growth Hopes

Chilean 10-year swaps reached an 18-month high of 5.64% last week, driven by investor optimism regarding economic stimulus. Market participants are betting that government measures to reduce taxes and bureaucracy will reactivate growth, even as the economy borders recession.

President José Antonio Kast is leading the push for tax changes to stimulate the economy. However, the Central Bank of Chile recently lowered its 2026 growth forecast to a range between 1% and 1.75%. This optimism is countered by persistent inflation, which was 3.9% in May, and a gross debt level approaching 45% of GDP.

External and technical pressures are also contributing to the rise. Increasing yields from the United States Department of the Treasury have raised global financing costs. Additionally, pension fund managers are limiting demand for long-duration assets as they await final regulations for a transition to generational funds scheduled for April 2027.