Foreign investors are flocking to Chile's domestic bonds at the fastest pace ever, a phenomenon largely attributed to the "Sell America" sentiment and the impending right-wing government, with non-resident holdings of peso bonds soaring to $9.3 billion in July 2025 from $6.6 billion at the end of 2024, a 40% increase that outpaced other Latin American markets. By November 2025, foreign holdings of local-currency sovereign bonds reached a record $14 billion, more than double the level at the end of 2024, marking Chile as a standout in emerging markets for capital inflow.
Several factors are fueling this surge in investor interest. The election of President-elect José Antonio Kast, who has pledged fiscal consolidation and plans to cut $6 billion in public spending in his first 18 months, has renewed investor confidence. This commitment to fiscal restraint, combined with soaring copper prices (up 44% from the previous year and reaching an all-time high earlier in the month), is significantly boosting Chile's fiscal and balance-of-payments accounts. Additionally, the broader trend of investors shifting away from U.S. assets has positioned Chile as an attractive alternative due to its investment-grade rating, strong institutions, and deep financial markets.
The influx of foreign capital is having a profound impact on Chile's financial landscape. The peso has appreciated 11.6% against the dollar in the past year, reaching its best level since February 2024 at around 880 pesos per dollar in early January 2026. Yields on five-year peso-denominated bonds have fallen by 29 basis points since November, settling around 5.08%, their lowest in over two years. This renewed confidence is strengthening the peso, driving down financing costs for the government and private sector, improving macro stability, and enhancing the government's ability to finance itself, positioning Chile among Latin America's most favored markets once again. Foreign ownership of locally issued Chilean government debt has risen to 11.4%, the highest since Q2 2022, from 8% at the end of the previous year.
Amidst global bond market activity, Chilean corporates are also increasingly looking to local financing. The total return from both interest rates and currency appreciation has made Chilean local bonds highly attractive, as noted by Anders Faergemann, senior portfolio manager at PineBridge Investments, who saw the Chilean peso as mispriced relative to its fundamentals. This positive outlook is further supported by Chile being one of the few countries globally with an investment-grade rating and strong fundamentals, benefiting from favorable global economic tailwinds, according to Andres Perez, chief economist for Latin America at Itaú Bank. The current fiscal budget anticipates issuing approximately $17.4 billion in debt, with 70% in local currency, though this amount could shrink with fiscal consolidation.
