Bloomberg News

Colombia Swap Yields Fall to Four-Month Low on Rate Cut Outlook

June 21, 2012

Yields on Colombia’s interest-rate swaps fell to a four-month low as signs the economy is slowing led traders to bet on a cut in borrowing costs this year.

The yield on three-month interest-rate swaps fell one basis point, or 0.01 percentage point, to 5.05 percent at 12:06 p.m. in Bogota, according to data compiled by Bloomberg. It was the lowest level on a closing basis since Feb. 13.

The drop indicates traders expect policy makers to cut the overnight lending rate within the next three months from the current 5.25 percent. That differs from a central bank survey published June 13 showing most analysts expect them to raise the target rate by a quarter-percentage point in December.

“The economy is decelerating,” Pedro Ospina, a fixed- income analyst at Interbolsa SA in Bogota, said in a phone interview. “That puts a nail in the coffin on those bets for more hikes.”

Gross domestic product grew 4.7 percent in the first quarter from the year earlier, the national statistics agency said today. The increase was in line with the median forecast of 27 analysts in a Bloomberg survey and down from 6.1 percent in the last three months of 2011.

April retail sales declined 2.8 percent in the first year- on-year drop since September 2009, the government said yesterday. The result was worse than all of the forecasts compiled by Bloomberg. Industrial output fell 1.6 percent, compared with a median estimate for a 1 percent increase. Colombia has raised interest rates nine times since the start of 2011 to cool growth propelled by consumer credit growth and record levels of foreign investment in oil and mining.

Peso Bonds

The yield on Colombia’s 10 percent peso-denominated debt due in July 2024 fell four basis points, or 0.04 percentage point, to 7 percent, according to the central bank. That’s the lowest level on a closing basis since the securities were issued in 2009.

“Fundamentals are positive to be invested in fixed-rate securities in the medium and long end of the curve,” Ospina said. “Inflation is under control, and inflation expectations will remain low.”

Colombia’s peso depreciated 0.4 percent to 1,777 per dollar. It has gained 9.1 percent this year, the best performance among all of the 170 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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