Bloomberg News

Peruvian Borrowing Costs Plunge as European Debt Concern Eases

October 11, 2011

Oct. 11 (Bloomberg) -- Peru’s benchmark overseas borrowing costs fell the most in 17 months as optimism that European leaders will stem the region’s debt crisis boosted demand for emerging-market bonds.

The extra yield investors demand to own Peruvian government securities instead of U.S. Treasuries fell 22 basis points, or 0.22 percentage point, to 239, according to JPMorgan Chase & Co. That’s the steepest drop since a decline of 23 basis points in May 2010.

“It’s an unwind of extreme pessimism,” said Siobhan Manning, head of Latin American strategy at RBS Securities Inc. in Stamford, Connecticut. Investors have been shifting away from more liquid securities such as U.S. Treasuries into higher- yielding emerging-market assets “now that there has been a build-up of diplomatic pressure for Europeans to come up with a more consistent approach to their issues,” Manning said.

German Chancellor Angela Merkel and French President Nicolas Sarkozy said Oct. 9 they will deliver a plan to recapitalize European banks and address the Greek debt crisis by the Nov. 3 Group of 20 summit.

The sol weakened 0.1 percent to 2.7310 per U.S. dollar, from 2.7280 yesterday.

The yield on Peru’s benchmark 7.84 percent sol-denominated bonds due August 2020 fell two basis points to 5.78 percent, according to prices compiled by Bloomberg.

Peru will expand a fiscal stimulus program that equals 0.5 percent of gross domestic product as the probability the world will enter a recession has increased, Finance Minister Miguel Castilla said Oct. 7.

--Editors: Richard Richtmyer, David Papadopoulos

To contact the reporter on this story: John Quigley in Lima at jquigley8@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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