Chile pension funds race to close out US interest rate bets

Chile: Chile is a South American country whose private pension fund administrators manage the retirement savings of most citizens through a system of seven AFPs. These funds recently built large positions in derivatives tied to US interest rates over the past two years. The current unwind of those trades stems directly from the inflation pressures triggered by the Iran war. Markets: Chilean pension funds are actively closing out derivative positions linked to US interest rates following adverse market shifts. Regulation: New rules taking effect next month are requiring Chilean pension funds to unwind certain derivative holdings. Geopolitics: The conflict with Iran has generated a global inflation shock that has driven up US bond yields.