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Summary of the Latin America Strategy Report: Peru

Core Content

This report provides an analysis of the exposure of non-residents and Peru's pension funds to the Soberanos curve, which refers to the government bond yield curve in Peru. It also discusses the composition and performance of Peru's pension fund assets under management (AUM), as well as the role of foreign investors in the Peruvian public debt market.

Key Findings

Non-Residents' Exposure to the Soberanos Curve

• Exposure Decrease: Non-residents' exposure to the Soberanos curve has decreased by 8.3% since the November report.
• DV01 Value: The total non-residents' exposure to nominal rates in March 2018 was USD 9.5 million DV01, representing a 41.2% increase year-over-year.
• Highest Exposure Bond: The August 2032 bond remains the most heavily exposed bond to non-residents, with a DV01 of USD 2.4 million.
• Currency Appreciation: Despite a 1.1% appreciation of the PEN against the USD in March, non-residents' exposure to PEN nominal rates fell by 2.1% month-over-month.

Peru's Pension Fund System

• Increased Exposure: The pension fund system has increased its exposure to the Soberanos curve by 33% since November, with a USD DV01 increase of 2.2 million.
• Second-Largest Exposure: Pension funds maintain the second-largest exposure to the nominal bond market, following non-residents.
• Top Bond Exposure: The largest exposure among pension funds is to the August 2037 bond, with a DV01 of 2 million USD.
• Portfolio Composition: In March 2018, government securities and foreign mutual funds accounted for over 66% of the total portfolio of pension funds.

Foreign Investors' Share of Public Debt

• Decreased Share: Foreign investors' share of public debt fell to USD 14.4 billion in February 2018, representing 46.4% of total domestic public debt.
• Relative Position: Despite this decline, the level of foreign participation in Peru's bond market remains relatively high for Latin America.
• International Reserves: The amount of foreign debt represents only 23% of international reserves, indicating a strong position in case of financial outflows.
• Pension Fund Share: Pension funds' share of public debt has been increasing since September 2017 but is still 4 percentage points lower than the start of 2017.

Private Pension Funds (AFPs)

• AUM Growth: In March 2018, private pension funds (AFPs) total AUM increased by 0.4% month-over-month in PEN terms, reaching USD 49.7 billion.
• Year-over-Year Growth: AFPs' AUM increased by 15.3% year-over-year.
• Asset Allocation: Government securities and foreign mutual funds are the two largest allocations, representing more than 66% of the total portfolio.
• Foreign Mutual Funds Increase: The biggest increase in holdings was in foreign mutual funds, up 5% year-over-year, while government securities only increased by 2% in recent months.

Charts Mentioned

• Charts 1-4: Non-residents' exposure to the Soberanos curve and its breakdown.
• Charts 5-8: Non-residents' share of Peruvian debt.
• Charts 9-12: Pension funds' AUM and its breakdown.

Legal and Regulatory Information

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• The document may contain simulated performance data, which is for illustrative purposes only and not indicative of future results.
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Important Notes

• The document is produced by Banco BNP Paribas Brasil S.A. and written by the Strategist and Economist teams of BNP Paribas.
• It is not intended for use by non-Relevant Persons.
• No guarantees are made regarding the accuracy or completeness of the information.
• The information may be subject to change without notice.
• No investment, financial, legal, or tax advice is provided.
• All performance data is based on internal models and may not reflect actual market conditions.