Colombia’s peso bonds posted their best weekly performance in eight months as investors bet on slower-than-expected inflation.
The yield on the country’s 10 percent peso-denominated debt due in July 2024 fell five basis points, or 0.05 percentage point, to 7.08 percent at the close of trading in Bogota, according to the central bank. That pushed the weekly drop to 16 basis points. The price rose 0.489 centavo today to 123.395 centavos per peso.
Colombia’s central bank is “very confident” that inflation will slow to 3 percent, bank chief Jose Dario Uribe said in an interview today in Cartagena.
Annual inflation slowed to 3.4 percent in March, the national statistics agency said in an April 4 report, below the median estimate of 3.63 percent in a survey of 23 economists conducted by Bloomberg. The central bank targets inflation between 2 percent and 4 percent this year.
“Inflation expectations are helping TES bonds,” said Camilo Contreras, a fixed-income analyst at Ultrabursatiles SA brokerage in Bogota. “Some of this is seasonal, but the fundamentals are in favor of the TES bonds.”
Strong growth this year will boost tax revenue, leading the government to sell fewer TES bonds in the future, Contreras said. He said he expects the yield on the 2024 bonds, the most traded of the peso debt, to “technically correct” to about 7.2 percent before falling below 6.5 percent by September. Seasonal inflation during the fourth quarter will push the yield to about 6.9 percent by the end of the year, he estimated.
Policy makers expect the economy to grow 5 percent this year, Uribe said. The central bank remains concerned by the pace of credit growth, which could create risks if it continues at its current pace for a prolonged period, Uribe said.
The peso slid 0.1 percent this week to 1,775.5 per dollar. It has jumped 9.2 percent this year, the best performance among 25 emerging-market currencies tracked by Bloomberg.
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