Bloomberg News

Colombia Swaps Fall to Four-Month Low on Outlook for Lower Rates

June 22, 2012

Yields on Colombia’s interest-rate swaps fell to a four-month low as the slowest economic growth since 2010 fueled speculation the central bank will cut borrowing costs after nine increases in the past 15 months.

The yield on three-month interest-rate swaps fell one basis point, or 0.01 percentage point, to 5.04 percent at 9:54 a.m. in Bogota, according to data compiled by Bloomberg. That’s the lowest level on a closing basis since Feb. 13.

The current level indicates traders expect Banco de la Republica to cut the overnight lending rate, which is now at 5.25 percent, within the next three months. That differs from a central bank survey published June 13 showing most analysts expect policy makers to raise the target rate by a quarter- percentage point in December.

“With growth slumping in Europe and oil prices falling, the central bank will need to cut rates to stimulate growth,” said Guillermo Puentes, the head trader at Banco de Comercio Exterior de Colombia SA, known as Bancoldex.

Gross domestic product grew 4.7 percent in the first quarter from a year earlier, the national statistics agency said yesterday. That was down from 6.1 percent in the last three months of 2011 and the slowest pace since the fourth quarter of 2010.

The yield on Colombia’s 10 percent peso-denominated debt due in July 2024 rose two basis points to 7.02 percent, according to the central bank.

Colombia’s peso depreciated 0.5 percent to 1,787 per dollar. It has gained 8.5 percent this year, the best performance among all 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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