Bloomberg News

Peru Yields Fall Most in Week on Bets Europe to Contain Crisis

October 05, 2011

Oct. 5 (Bloomberg) -- Peruvian bonds rose, pushing down yields the most in a week, as investors speculated the euro area will shore up its banks and the South American country’s central bank said the nation will withstand slower global growth.

The yield on Peru’s benchmark 7.84 percent sol-denominated bond due August 2020 fell five basis points, or 0.05 percentage point, to 5.91 percent, according to prices compiled by Bloomberg. The bond’s price rose 0.38 centimo to 113.14 centimos per sol.

European Union officials are working on plans to boost bank capital to contain the euro-region’s debt crisis, the International Monetary Fund said. Chancellor Angela Merkel signaled Germany is ready to join efforts to recapitalize banks and said investors may have to accept bigger losses as part of a Greek rescue. Peru can post “very good” growth even as the U.S. and Europe expand at “anaemic” rates, Julio Velarde, president of the Andean nation’s central bank, told Congress today.

“Global markets are rising and that’s helping Peruvian bonds, which had been hit by a sell-off by non-residents,” said Roberto Flores, head of research at Inteligo SAB, a Lima-based brokerage. “The strength of the Peruvian economy may allow Peru to avoid a recession, even in a scenario in which the world grows much more slowly than expected.”

Sol Rises

The sol strengthened 0.5 percent to 2.7630 per U.S. dollar, from 2.7775 yesterday. That’s the sol’s strongest advance in four months.

The extra yield investors demand to own Peruvian government bonds instead of U.S. Treasuries declined three basis points to 291, according to JPMorgan Chase & Co.

“Strong” growth in Latin America and “relatively high” commodity prices are likely, provided that Europe contains its debt crisis, the U.S resolves its budget problems and Asia avoids a slowdown, Nicolas Eyzaguirre, director of the IMF’s Western Hemisphere department, said today at an event in Lima.

“China has the capacity to keep stimulating its economy in the short term and therefore we think raw material prices will remain relatively interesting,” Eyzaguirre said. Peru is among the Latin American countries best placed to cope with slower global growth, he said.

--Editor: Glenn J. Kalinoski

To contact the reporter on this story: John Quigley in Lima at

To contact the editor responsible for this story: David Papadopoulos at

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