The Uruguayan global bonds They are positioned as an interesting alternative for investors in 2024, although their behavior will be directly impacted by the decisions made by the United States Federal Reserve (Fed) with respect to the interest rates.
It is expected that during the year the Fed define a cut in rates, something that may or may not occur in the short term, which could boost Uruguayan securities, according to the latest outlook report published by the wealth management agency Nobilis.
In 2024, a more favorable global context is expected for emerging countries, If we take into account that the process of disinflation of developed economies is heading towards a “soft landing” scenario (mild recession).
What level are the Fed rates at and what is the meeting schedule like?
The Fed comes from maintaining interest rates for the fourth consecutive time in a range between 5.25% and 5.50%, the maximum in the last 23 years, with a view to stabilizing the inflationwhose objective is 2% annually, a decision that prompted the global dollar so far this year.
The Federal Reserve had anticipated at the end of last year that it foresees cuts of 75 basis points by 2024. However, the reduction has not yet arrived and operators assume that it will not occur at the next meeting of monetary politics, which will be in two days: March 19 and 20.
He calendar of meetings includes six other reviews in the year, the first of them on April 30 and May 1, while the last of the first semester is scheduled for June 11 and 12. In the second part of the year, the meetings will adjust to the following schedule: July 30 and 31; September 17 and 18; November 6 and 7; and December 17 and 18.
The expectation for Uruguayan global bonds
If the Fed finally proceeds with the announced cut, the performance curve of Uruguayan bonds will fall, so the price will increase. In this regard, Nobilis highlighted that “it may take more or less time, but the Fed will surely achieve the objective,” which is why they called “take duration” regarding dollar bonds.
It is that if the scenario of “soft landing”, The rates of the American bond curve would tend to fall, as would the Uruguay curve in dollars, so prices will rise.
Meanwhile, instruments in national currency They will be influenced by the global context. According to forecasts, if there is a fall in risk-free rates and a weak dollar, The scenario will stimulate demand for securities from emerging countries in local currency, with those from emerging countries being fundamentally attractive. Latin America.
The extra challenge of an election year
The elections 2024 in Uruguay, as well as the vote in USA, They represent a usual increase in uncertainty, especially in the months prior to the elections, something that “can impact economic and financial variables with negative consequences for activity, inflation and expectations,” Nobilis anticipated.
Faced with this situation, it will be important that the caution for what may happen at the national level and also in the United States, where it will be important to “closely follow what the presidential candidates in relation to possible tax cuts or new regulation in sectors of the economy.”
Source: Ambito
