Bloomberg News

Colombian Swap Yields Hold at Lowest Level in Almost Five Months

June 27, 2012

Yields on Colombia’s interest-rate swaps held at the lowest in almost five months after Finance Minister Juan Carlos Echeverry said it would be “reasonable” to cut borrowing costs if global financial turmoil gets worse.

The yield on three-month interest-rate swaps remained at 4.96 percent, matching the lowest closing level since Jan. 30 reached yesterday, according to data compiled by Bloomberg.

The drop indicates traders expect policy makers to cut the 5.25 percent overnight lending rate within the next three months. The central bank will leave the benchmark unchanged at the June 29 meeting, according to all 27 economists in a Bloomberg survey.

“A rate cut is definitely something that will begin to be discussed” by the central bank’s board, said Felipe Campos, the head analyst in Bogota at Alianza Valores, a brokerage.

At a meeting yesterday with the central bank’s board, President Juan Manuel Santos discussed interest rates and asked the policy makers to consider increasing dollar purchases to make the country’s international reserves “more solid,” Echeverry said in an interview today with W Radio.

“It would be reasonable to start thinking of lowering” interest rates, Echeverry said. “When there are problems, it’s a key tool. There could be a reduction in rates throughout the year if that were necessary.”

The central bank has said it will buy a minimum of $20 million daily in the spot market until at least Nov. 2.

‘Doing Well’

The Colombian economy is “doing well,” Echeverry told reporters today during an event in Bogota. “Rates depend on the international context.”

The peso rose 0.4 percent to 1,796.02 per dollar. It has fallen 0.4 percent this quarter, paring this year’s rally to 7.9 percent, still the best performance among all of the world’s currencies tracked by Bloomberg.

The yield on Colombia’s 10 percent peso-denominated debt due in July 2024 rose one basis point, or 0.01 percentage point, to 6.99 percent, according to the central bank. The price fell 0.096 centavo to 123.991 centavos per peso.

The country’s borrowing costs fell at an auction today of fixed-rate securities. The government sold bonds due in August 2026 to yield 7.08 percent, down from 7.18 percent at the last auction on June 13.

Colombia sold bonds due in May 2022 to yield 6.98 percent, the first time in weekly debt auctions the government sold fixed-rate securities with a yield below 7 percent.

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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