Bloomberg News

Colombia Bond Yields Rise Most in Two Weeks on Inflation Concern

November 15, 2011

Nov. 15 (Bloomberg) -- Colombia’s peso bonds fell, pushing yields up the most in two weeks, after the central bank said 2011 year-end inflation will be in the higher end of its target range of 2 to 4 percent.

The yield on Colombia’s benchmark 10 percent bonds due in July 2024 rose five basis points, or 0.05 percentage point, to 7.53 percent at 10:10 a.m. Bogota time. That’s its biggest increase since Oct. 28. The bond’s price fell 0.431 centavo to 119.666 centavos per peso.

It’s “highly probable” that Colombia’s year-end inflation rate will be 3.5 percent, above the mid-point of the central bank’s target of 2 to 4 percent, bank chief Jose Dario Uribe said Nov. 11.

“The bank has increased its projections and investors are expecting inflation to be a bit higher than previously forecast,” said Francisco Chavez, an analyst at Corredores Asociados. “That is pushing up all the bond yields.”

Annual inflation accelerated to 4.02 percent in October, exceeding the upper limit of its target range for the first time in more than two years. Economists had forecast annual inflation of 3.95 percent last month, according to the median estimate of 20 analysts surveyed by Bloomberg.

“Inflation has been rising fundamentally because of behavior of food prices,” Uribe said. “It has a lot to do with climate factors that affect harvests negatively and cause increases in prices. The potato is one example.”

The peso was little changed at 1,914.75 per U.S. dollar, from 1,914.15 yesterday.

--Editors: Marie-France Han, Glenn J. Kalinoski

To contact the reporter on this story: Blake Schmidt in Bogota at Bschmidt16@bloomberg.net

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


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