Bloomberg News

Colombia Bond Yields Drop Near Two-Week Low on Inflation Outlook

December 07, 2011

Dec. 7 (Bloomberg) -- Colombia’s peso bonds rose, pushing yields near a two-week low, as slower-than-forecast inflation lifted demand for fixed-rate securities.

The yield on the nation’s 10 percent bonds due in July 2024 fell five basis points, or 0.05 percentage point, to 7.55 percent, according to the stock exchange. The yield declined to 7.54 percent on Dec. 5, the lowest level since Nov. 18. The bond’s price rose 0.447 centavo to 119.420 centavos per peso.

“The market is calm in terms of inflation,” said Daniel Escobar, an analyst at brokerage Global Securities in Bogota.

The benchmark security will continue trading in a range between 7.53 percent and 7.59 percent, Escobar predicts, as the market awaits the outcome of a summit of European Union leaders that will start tomorrow. Standard & Poor’s warned this week that it may downgrade 15 euro nations including Germany and France depending on the result of the summit.

Consumer prices rose 0.14 percent in November, the national statistics agency said in a Dec. 5 report, less than the 0.19 percent median forecast of 30 analysts in a Bloomberg survey. Annual inflation was 3.96 percent last month, down from 4.02 percent in October, which was the first time in two years that inflation surpassed the central bank’s 2 percent to 4 percent target.

Colombian President Juan Manuel Santos asked policy makers to refrain from raising interest rates further after the central bank became the only one in Latin America to increase borrowing costs in the past four months.

Rate Increase

Banco de la Republica raised the overnight lending rate by 25 basis points to 4.75 percent on Nov. 25. Brazil started cutting rates in August as countries across emerging markets shifted to policies that aim to safeguard growth from the global slowdown.

Colombia’s central bank “has been prudent” in raising interest rates to keep inflation in check, Santos said in an interview late yesterday with RCN Radio, according to a statement on the presidential website. “What I don’t think is convenient is for them to continue raising interest rates.”

The peso rose 0.5 percent to 1,923.13 per U.S. dollar, from 1,933.40 yesterday. The currency has dropped 0.8 percent in the last month. Colombian markets are closed tomorrow for a national holiday.

Trade volume has fallen in the local currency market as investors await the outcome of the European summit, according to Juan Camilo Santana, an analyst at an analyst at Cia. de Profesionales de Bolsa SA brokerage in Bogota.

“People don’t want to bet much without knowing for certain what will happen,” Santana said.

--Editors: Richard Richtmyer, 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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