Bloomberg News

Peruvian Yields Fall on Bets Global Slowdown to Trigger Rate Cut

October 13, 2011

Oct. 13 (Bloomberg) -- Peruvian bonds rose, pushing down yields to a four-week low, amid speculation slower global growth will lead the nation’s central bank to lower borrowing costs for the first time since 2009.

The yield on the nation’s benchmark 7.84 percent sol- denominated bond due August 2020 fell four basis points, or 0.04 percentage point, to 5.68 percent, according to prices compiled by Bloomberg. The security’s price rose 0.31 centimo to 114.78 centimos per sol.

Peru’s central bank signaled Oct. 6 it is ready to change its monetary policy stance after keeping its benchmark rate unchanged at 4.25 percent for a fifth month on concern about economic stagnation in Europe and the U.S. It had raised the rate five times from January through May as inflation surged. Growth in the Andean nation will be slower than expected this year and next as prices for the country’s commodity exports ease, according to the central bank.

“Peru’s central bank was the first in the region to pause in June when no-one was talking about a global recession,” said Diego Donadio, a Latin America strategist at BNP Paribas Brasil SA in Sao Paulo. “It justifies the call for a rate cut in December. If anything, they could cut earlier.”

China’s exports rose the least in seven months in September amid slowing demand from Europe, the country’s customs bureau said today.

The Peruvian government will expand a fiscal stimulus plan as the probability the world will enter a recession has increased, Finance Minister Miguel Castilla said Oct. 7.

The sol weakened 0.1 percent to 2.7245 per U.S. dollar, from 2.7232 yesterday.

The central bank will lower rates by early 2012 as the Peruvian economy decelerates, Credit Suisse AG said yesterday in an e-mailed report to clients. The bank recommended investors buy the nation’s sol-denominated bond due August 2031 after prices fell during September.

The government led by President Ollanta Humala “has shown that it plans to maintain the current economic environment, which should support local assets,” Credit Suisse said.

Humala, a former army officer, took office July 28.

--Editor: Marie-France Han

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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