Summary: Local investors were the main buyers of nominal Soberanos in April, with Pension funds accounting for 56% of all gross inflows during the month, while Public funds, Insurance companies, and local banks accounted for another 42%. On the other hand, International investors made up the majority of sellers, accounting for virtually all gross outflows for the month. The net issuance of nominals in April amounted to PEN0.7bn (+0.44%M). Insurance companies were the main buyers in the VAC market (not unusual for the smaller linker market in Peru), absorbing c.100% of the PEN30mn of net linker issuance. In terms of nominal curve allocation, pension fund holdings repositioned towards the 2034s, 2037s, and 2040s from 2039s and 2033s. Offshores’ repositioned their allocation to the 2031s and 2033s, from 2032s, 2034s, 2037s, and 2040s.
- Market View: Peru’s stronger fiscal position, currency stability and higher risk-adjusted real yields have supported the recovery of international investor holdings. In addition, domestic inflation in Peru is well-anchored below the 2% target. Peru looks to be a stronger regional defensive play than its historically fiscal conservative counterpart, Chile, which is likely to face some inflationary and fiscal pressures in the coming years as it approaches its debt limit of 45% of GDP. In comparison, Peru is likely to remain closer to a debt-to-GDP ratio of 34%. The recent 8th AFP withdrawal proposal remains at the committee stage for now; but remains one near-term risk to watch, although we note AFPs currently represent only 9.2% of the market, down from 27% pre-COVID. In addition, AFP cash holdings currently total c.USD2.5bn, while the BCRP maintains policy tools to support market liquidity. The passing of reforms to the pension system in 2024 does add a legislative hurdle vs. the previous withdrawal episodes. We close our long PeruGB 2033s trade at 6.22% after entering at 6.32% as US rates pressure continues to spill over into local rates, although we will look to reengage and potentially extended duration in the country’s upcoming debt liability management (DLM) operations. The softer-than-expected activity print in Peru and rising unemployment figures will likely ensure inflation remains well anchored and open the door for additional BCRP rate cuts in 2H25.
- Pension funds were the largest net buyers of Soberanos in April, purchasing a net total of PEN846mn, taking their holdings from PEN15.4bn to PEN16.3bn. Local pension funds own just 9.6% of the Soberanos market, down from 10.3% in November 2024, but still up from a historical low of 7.8% in September 2024, after the maturity of the recent repurchase agreements with the BCRP and more stable inflows into the AFP system
- Local banks were net buyers in April, with their holdings rising to PEN56.2bn from PEN56.1bn in March 2025. Ownership remains roughly flat at 33.3% of outstanding bonds. Overall, local bank holdings rebounded from the recent low of 32.9% in February but remain well below the June 2024 high of 40.3%; a welcoming development, at is has been supported by the recovery of international investor and local insurance company holdings.
- Public Funds were the second-largest buyers in April, with their allocation increasing by PEN268mn to PEN7.2bn from PEN6.9bn, which drove holdings higher to 4.3% from 4.1% of the total Soberanos market.
- Insurance companies were net buyers in April, with their allocation increasing by PEN221mn to PEN15.5bn from PEN15.3bn, which drove holdings higher to 9.2% from 9.1% of the total Soberanos market.
- International investors were the only sellers in April, reducing their holdings of Soberanos by just PEN0.8bn, reducing their total holdings to PEN71.9bn from PEN72.6bn in March. International investor holdings, as a percentage of total bonds outstanding, fell slightly by 0.6pp, now at roughly 42.5%, sustaining the recovery from the recent 35.5% low as of March 2024, although just off recent highs of 43.5% in February 2025.