Bloomberg News

Colombian Peso Bond Yields Fall to One-Week Low on CPI Outlook

May 22, 2012

Colombia’s peso bonds rose, pushing yields to a one-week low, after the central bank said inflation will end this year near the 3 percent mid-point target.

The yield on the country’s 10 percent peso-denominated debt due July 2024 fell three basis points, or 0.03 percentage point, to 7.13 percent, according to the central bank. The price rose 0.238 centavo to 122.842 centavos per peso.

Inflation this year and next will be close to 3 percent, while consumer-price increases in 2014 will be “slightly” below that level, central bank chief Jose Dario Uribe said May 18 in the presentation of the bank’s quarterly report. Colombian markets were closed yesterday for a holiday.

“People have been lowering their inflation expectations as inflation has surprised on the low side this year,” said Daniel Escobar, the head analyst at Global Securities brokerage in Bogota. “Uribe’s comments help give support to that optimism” and the peso bond curve should continue to flatten, he said.

Consumer prices rose 0.14 percent in April, less than the 0.17 percent median estimate among 30 economists surveyed by Bloomberg. Annual inflation was 3.43 percent, within the central bank’s 2 percent to 4 percent target range.

The gap between yields on Colombian government fixed-rate peso bonds due July 2024 and April 2013 is 179 basis points, or 1.79 percentage points. That’s down from 183 basis points on May 16.

The peso rose from a four-month low after U.S. home sales increased more than forecast and speculation grew that European leaders will join China in stepping up efforts to support global growth.

The currency advanced for the first time in seven days, gaining 0.2 percent to 1,826.80 per U.S. dollar. It touched 1,830.50 yesterday, the weakest level since Jan. 20. The peso has jumped 6.1 percent this year, the second-best performance after the Madagascar ariary among all currencies tracked by Bloomberg.

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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