Bloomberg News

Peruvian Bonds Post Biggest Two-Day Rally in Almost a Year

July 12, 2012

Peruvian bonds registered their largest two-day gain in 10 months on speculation the domestic economy will weather Europe’s sovereign-debt turmoil.

The price of the nation’s 7.84 percent sol-denominated bond due in August 2020 rose 0.45 centimo to 120.32 centimos, extending its two-day increase to 1.22 centimos, the most since Aug. 24. The yield dropped six basis points, or 0.06 percentage point, to 4.76 percent in trading today.

“Domestic demand for the most part is still quite resilient,” said Siobhan Morden, the head of Latin America fixed-income strategy at Jefferies Group Inc. in New York. “There’s a lot of liquidity and it’s got to go somewhere. You’d rather be in Peruvian or Mexican credit risk than European credit risk because they offer a growth differential.”

The sol appreciated 0.2 percent to 2.6290 per U.S. dollar according to Deutsche Bank AG’s local unit. The central bank purchased $151 million in the spot market to slow gains in the sol.

Peru’s economic activity probably expanded more than 5 percent in May after 4.4 percent growth in April, Banco de Credito del Peru (CREDITC1) said in a note e-mailed to clients yesterday.

The Andean country’s economy will expand almost 6 percent this year, bolstered by domestic demand and a recovery in China, Peru’s central bank President Julio Velarde said in an interview yesterday in Shanghai.

Policy makers in Peru will keep their target lending rate at 4.25 percent for a 14th straight month at a meeting today, according to the median forecast among economists by Bloomberg.

To contact the reporter on this story: John Quigley in Lima at jquigley8@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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