Following the trend of the last months, foreign investors reduced their holdings of Peru Soberanos from 42.3% in November to 41.1% in December, representing a reduction of PEN1.6bn in nominal terms. The year-over-year reduction is more remarkable if we consider that at the end of 2021 foreign holdings stood at 49.4%. International investors reduced positions at most points along the curve, but it was more remarkable in Soberanos 29s (PEN1bn) and 31s (PEN617mn), while investors increased their positions in Soberanos 32s by about PEN700mn. For the month, the Soberanos curve had a flattening bias and underperformed peers, which is in line with international investor activity. They were the main sellers, while banks (driven in part by the central bank) and pension funds, were the main buyers. At the latest Central Bank meeting (12 Jan), in line with expectations, BCRP lifted the key rate by 25bp to 7.75% and didn’t fully close the door to further adjustments. Political noise may be weighing on international investors’ appetite for Soberanos, and while fundamentals remain strong, a change in view is hard to foresee until social unrest and political noise subsides and there is more clarity about the toll on the economy and the political process, going forward. We also remain mildly cautious on Soberanos, and prefer to wait for the ongoing noise to subside to consider adding positions again.