Advancing on Chaos and the Dark

I may have found reason to doubt my bearish position on the Chilean real estate market. Business Week is reporting that Chile is set to debut 20-Year peso bonds. This is a significant development for the country, since most debts are denominated in UF (unidad fomento), which is an inflation-linked currency unit. This means that long-term fixed rate mortgages do not exist.

20-year peso bonds would change that, allowing banks to potentially launch 20-year nominal rate mortgages. Depending on the private sector response to this development, Chile could avoid a housing crises even if copper prices soften in 2012.