Bloomberg News

Peruvian Yields Fall to 3-Week Low as Currency Gains Spur Demand

November 17, 2011

Nov. 17 (Bloomberg) -- Peru’s sol-denominated bonds rose, pushing down yields to a three-week low, as gains in Latin America’s best performing currency this year spurred demand for local securities.

The yield on the nation’s benchmark 7.84 percent sol- denominated bond due August 2020 fell one basis point, or 0.01 percentage point, to 5.65 percent at 3:20 p.m. Lima time, according to prices compiled by Bloomberg. The bond’s price climbed 0.06 centimo to 114.90 centimos per sol.

Peru’s central bank purchased $34 million in the spot market today, after buying $78 million yesterday, as demand from mining companies pushed the sol to its strongest level since April 2008. The central bank’s moves to limit swings in the currency make Peru’s bonds attractive to investors concerned that Europe’s debt turmoil could lead to a sell-off in emerging- market assets, said Daniel Chodos, a strategist with Credit Suisse AG in New York.

“In the current environment of risk aversion,” the Andean nation’s moves to stem sol volatility “gives investors some assurance that in the event of a new sell-off the currency will continue to be well supported by the central bank,” said Chodos. “This official support of the currency benefits sol- denominated bonds.”

The sol rose 0.2 percent to 2.7008 per U.S. dollar, from 2.7065 yesterday, bringing its gain this year to 3.9 percent.

The extra yield investors demand to own Peruvian government bonds instead of U.S. Treasuries rose 10 basis points to 212, according to JPMorgan Chase & Co.

The central bank has made net purchases of $1.8 billion this year. It sold $575 million in September to temper declines in the sol, as slowing world growth triggered a sell-off in emerging market assets.

--Editor: Glenn J. Kalinoski

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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