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Monetary policy drives divergence in bond yields

Moves in Latin America’s currency and equity markets this month have been relatively small but the divergent paths of government bond yields have been more eye-catching. While short-term local currency yields have fallen in Brazil, Chile and Colombia as markets have started to anticipate a greater loosening of monetary policy in the near term, they have risen elsewhere – particularly in Argentina on the back of the central bank’s unexpected interest rate hike.

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