Bloomberg News

Colombia Yields Hold at Two-Week High on Inflation Concern

October 20, 2011

Oct. 20 (Bloomberg) -- Yields on Colombia’s peso bonds rose to a two-week high on bets heavier-than-average rain will push food prices higher and stoke inflation.

The yield on Colombia’s benchmark 10 percent bonds due in July 2024 rose five basis points, or 0.05 percentage point, to 7.56 percent. That’s its highest level since Oct. 7.

Colombia’s weather agency said yesterday that the La Nina weather pattern, which triggers above-average rainfall, may return in December and last through March. Rain in the first half of October was equivalent to the historical average for the whole month, according to the government. Floods last year and at the beginning of this year damaged crops and choked off farmers’ supply routes, pushing food prices higher.

“People are nervous as they fear the bad weather will lead to higher food prices,” said Camilo Perez, head analyst at Banco de Bogota SA, Colombia’s second-biggest bank.

Colombia’s consumer prices rose 0.31 percent in September from the previous month, driven by higher housing and food costs, after declining 0.03 percent in August. The government will release the October inflation report Nov. 5.

Economists covering the Colombian economy raised their year-end inflation forecast to 3.42 percent this month from 3.23 percent in the September survey, according to the median forecast in a central bank survey published Oct. 12.

The peso declined 0.3 percent to 1908.75 per U.S. dollar, from 1,902.42 yesterday.

Colombia yesterday imposed a limit on foreign-exchange trading by pension funds as it seeks to reduce the peso’s volatility after the global market sell-off sparked a plunge in the currency.

Pension funds’ currency transactions over a five-day period can equal no more than 2.5 percent of their assets under management, the Finance Ministry said in a statement. The measure limits trading in the spot market as well as derivatives trading, according to the statement.

--Editors: Glenn Kalinoski, Marie-France Han

To contact the reporter on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net

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


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