Peruvian bonds posted their biggest weekly advance in a year amid speculation central banks around the world will take more action to bolster growth, spurring demand for higher-yielding, emerging-market assets.
The yield on the nation’s 7.84 percent sol-denominated bond due in August 2020 fell 12 basis points, or 0.12 percentage point, to 4.64 percent today, extending the week’s drop to 27 basis points, according to prices compiled by Bloomberg. That’s the steepest fall since the week ended May 6, 2011. The price rose 1.94 centimos this week to 121.22 centimos per sol.
“Peru has benefited from the liquidity flowing into” emerging-market debt, said Estefany Castillo, an economist at Scotiabank Peru in Lima. “The sol isn’t very volatile and has an appreciatory trend, so it’s less risky in the eyes of a foreign investor.”
The sol gained 0.2 percent to 2.6240 per U.S. dollar at today’s close, according to Deutsche Bank AG’s local unit. Data from Peru’s financial regulator show that’s the strongest level since 1997. The currency advanced 1 percent this week.
Demand for the currency stems from expiring sol non-deliverable forward contracts and companies’ buying soles to pay worker bonuses, central bank research director Adrian Armas told reporters on a conference call today.
The central bank bought $184 million in the spot market today to slow the sol’s advance, extending its purchases this week to $360 million.
Treasuries fell and U.S. stocks gained as slowing expansion in China fueled wagers policy makers will boost stimulus measures. A “significant” number of European Central Bank Governing Council members are prepared to ease monetary policy, including cutting the deposit rate further, if the region’s financial crisis worsens, according to a report from Medley Global Advisors.
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