Bloomberg News

Peru Bonds Head for Best Weekly Gain in a Month on Sol Outlook

January 06, 2012

Jan. 6 (Bloomberg) -- Peru’s benchmark sol-denominated bonds headed for their biggest weekly gain in a month on bets rising metal exports and faster economic growth will spur gains in the local currency.

The yield on the nation’s benchmark 7.84 percent sol- denominated bond due August 2020 fell six basis points this week, or 0.06 percentage point, to 5.69 percent at 1:20 p.m. Lima time, according to prices compiled by Bloomberg. The bond’s price rose 0.43 centimo to 114.42 centimos per sol, the biggest weekly advance since the five days ended Dec. 2. The price was little changed in trading today.

Investors hunting for yield in emerging markets are seeking out sol-denominated securities after the currency outperformed Latin American peers last year. Peru’s growth outlook and the central bank’s moves to reduce swings in the sol by buying or selling dollars is luring investors, said Enrique Alvarez, the head of Latin America fixed income research at IdeaGlobal in New York.

“Investors are very content to come in and take what yield they can locally,” Alvarez said. “There’s very little likelihood that you’re going to see big volatility or a big reversal in the sol.”

The sol strengthened 3.9 percent last year, according to Deutsche Bank AG’s local unit. That’s the best performance among six major Latin American currencies tracked by Bloomberg.

The currency was little changed today at 2.6940 per U.S. dollar, from 2.6948 yesterday, according to the bank. It strengthened 0.1 percent this week.

Peru, the world’s third-largest copper and zinc producer, will probably grow 5.5 percent this year, one of the fastest rates in the region, while exports rise to $48 billion from $43 billion in 2011, Cabinet Chief Oscar Valdes said yesterday.

The economy probably expanded 6.8 percent last year, the central bank said Dec. 16.

--Editors: Brendan Walsh, 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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