Bloomberg News

Colombian Bond Yields Fall as Slowing Growth Fuels Rate Cut Bets

July 04, 2012

Colombia’s peso bonds gained, pushing benchmark yields to a record low, on speculation slowing growth will ease inflation and lead the central bank to cut borrowing costs this year.

The yield on Colombia’s 10 percent peso-denominated debt due in 2024 fell two basis points, or 0.02 percentage point, to 6.95 percent, according to the central bank. That is the lowest level on a closing basis since the securities were first sold in 2009. The price rose 0.182 centavo to 124.343 centavos per peso.

Colombia’s central bank on June 29 held the overnight lending rate for a fourth straight month at 5.25 percent as growth cooled and prices for the country’s commodities exports dropped. Government reports in June showed industrial output and retail sales unexpectedly fell in April and the economy expanded 4.7 percent in the first quarter, its slowest pace since 2010.

“People have been cutting their inflation forecasts as the economy decelerates,” said Cristian Duarte, an analyst at Global Securities brokerage in Bogota. “The idea Banco de la Republica will cut rates is taking force given the bad numbers we’ve seen in the last few weeks.”

Annual inflation slowed to 3.32 percent in June from 3.44 percent in May, according to the median estimate of 22 economists in a Bloomberg survey. The national statistics agency is slated to release figures tomorrow. The central bank targets annual inflation between 2 percent and 4 percent.

The peso advanced for a fourth day, gaining 0.1 percent to 1,767.14 per dollar. It has rallied 9.7 percent this year, the best performance 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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