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Colombia’s peso bonds rose, pushing yields to a record low, as speculation inflation will remain in check and expectations for a lower budget deficit buoyed demand for the fixed-rate securities.
The yield on Colombia’s 10 percent peso-denominated debt due in July 2024 fell five basis points, or 0.05 percentage point, to 7.05 percent, according to the central bank. That’s the lowest level on a closing basis since the debt was issued in 2009. The bond’s price rose 0.414 centavo to 123.635 centavos per peso.
“Colombia’s fundamentals remain strong,” said Pedro Ospina, a fixed-income analyst at Interbolsa SA, the country’s biggest brokerage. “Prospects for a lower budget deficit and falling inflation expectations are all good signs” that boost demand for the bonds, said Ospina.
Annual inflation quickened to 3.45 percent in April, within the central bank’s 2 percent to 4 percent target, from 3.40 percent in March, according to the median estimate of 23 economists surveyed by Bloomberg. The national statistics agency will release the monthly report on May 5.
The central government budget deficit this year may be 2.4 percent of gross domestic product, below the 2.6 percent target, Finance Minister Juan Carlos Echeverry said April 27.
The gap between yields on government inflation-indexed bonds due 2013 and similar-maturity fixed-rate debt, a gauge of annual consumer price increase expectations, fell to 2.58 percentage points, from 4.07 on Feb. 17.
Colombia plans to issue new 15-year fixed-rate peso bonds every other year to create long-term benchmark securities, according to two traders who attended a Finance Ministry meeting on the matter yesterday.
Colombia would also issue 20-year inflation-linked peso debt every other year, according to the people, who asked not to be identified because the plans haven’t been made public.
The government is seeking to have benchmark fixed-rate bonds, known as TES, due in five, 10 and 15 years and benchmark debt in inflation-linked currency units, known as TES UVR, due in five, 10 and 20 years, according to the people.
Colombia would reissue the 20-year inflation-linked debt in 10 and 15 years and the 15-year fixed-rate securities in five and 10 years, the people said. An official at the Finance Ministry declined to comment.
The peso closed little changed at 1,756.45 per U.S. dollar, from 1,757.05 yesterday. It has rallied 10.4 percent this year in the second-best performance after the Hungarian forint among all currencies tracked by Bloomberg.
In a bid to ease the local currency’s rally, the central bank said on April 30 it will buy a minimum of $20 million daily in the spot market until at least Nov. 2, extending the program by three months.
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