Summary: International investors were the main buyers of nominal Soberanos in June, accounting for 70% of all gross inflows during the month. Interestingly, pension funds were the second largest buyers, accounting for most of the remaining 30% of gross inflows at 26%. This was the largest inflow in a single month from pensions since October 2024. The net issuance of nominals in May amounted to PEN6.6bn (+3.7%M). Banks accounted for all the gross outflows in June. In terms of nominal curve allocation, pension fund holdings actively bought 17% of the recently issued 2035s while reducing their holdings in longer-dated tenors (mainly PeruGB 2037s and 2040s, as well as the 2033s). Offshores’ picked up 38% of the PeruGB 2035 new issue and boosted their allocation along the length of the curve, mainly 2028s, 29s, 31s, 32s and 40s.
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Market View: We note that heading into 1H26 may lead to more of a focus on the upcoming local elections and would suggest looking at potential forward FX hedges in the area of 3x12 or 6x12 on local bond holdings. Peru’s stronger fiscal position, currency stability and higher risk-adjusted real yields and notable trade surplus 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 strong regional defensive play and is likely to remain closer to a debt-to-GDP ratio of 34%. The recent 8th AFP withdrawal proposal is still at the committee stage, for now being pushed for debate in commission in the next legislative session, suggesting a delay to late August or September. Nevertheless, AFPs currently account for only 10.1% of the market 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 time frames. Peru inflation remains below the 2.0% target at 1.7% through July and with a rise in Chinese exports to Peru at lower prices the country is likely to see inflation remain well anchored. The trade surplus is well supported and should continue to help the country build up foreign currency reserves, which have now reached USD87.5bn, up by USD2.5bn in July from USD85bn in June. We maintain our long PeruGB 2035 recommendation, targeting 5.75% with a stop-loss of 6.70%.
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International investors were the largest buyers in June, increasing their holdings of Soberanos by PEN5.8bn to total holdings of PEN78.8bn from PEN73.0bn in May. As a percentage of total bonds outstanding, International investor holdings rose 1.7pp, now at roughly 44.5%, sustaining the recovery from the recent 35.5% low as of March 2024.
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Pension funds were the largest net buyers of Soberanos in June, buying a net total of PEN2.1bn, taking their holdings from PEN15.8bn to PEN17.9bn. Local pension funds own just 10.1% of the Soberanos market, up from a historical low of 7.8% in September 2024, after the maturity of the recent repurchase agreements with the BCRP and given the more stable inflows into the AFP system. Nevertheless, holdings remain very subdued relative to the pre-COVID levels of 27% market ownership. Even so, recent monthly inflows have driven allocation to the highest level since May 2024 and could help to mark the start of a longer-term recovery should withdrawal risks remain subdued.
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Local banks were net sellers in June, with their holdings falling to PEN55.2bn from PEN56.8bn in May 2025. Ownership fell back to 31.2% of outstanding bonds. Overall, local bank holdings continue falling and remain well below the June 2024 high of 40.3%; a welcoming development, at this has been supported by the recovery of international investor and local insurance company holdings and now local pension funds.
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Public Funds were minimal buyers in June, with their allocation increasing by just PEN26mn and holdings rising on a rounded basis to PEN7.3bn with holdings falling back slightly to 4.1% of the total Soberanos market in June from 4.3% in May.
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Insurance companies were also minimally net buyers in June, with their allocation increasing by just PEN125mn to PEN15.7bn from PEN15.6bn, which paired back holdings to 8.9% of the total Soberanos market from 9.1% in May.