Chilean referendum offer, Argentina bonds, Mexico rates

Chilean markets rebounded today on news that congress accepted protestors’ demand that a constituent assembly play a role in writing a new constitution next year. This suggests that the crisis may soon ease, so the peso will likely strengthen further in the coming weeks. Elsewhere, while capital controls in Argentina have stabilised the currency and the central bank’s FX reserves, a rebound in bond prices is unlikely as President-elect Alberto Fernández seems unwilling to adopt a market-friendly approach. And in Mexico, policymakers cut the key policy rate this week, and we expect another three 25bp of cuts over the next six months.