Bloomberg News

Colombia Peso Bond Yields Fall on Interest Rate Cut Bets

July 18, 2012

Yields on Colombia’s peso bonds fell amid speculation the central bank will lower interest rates this year to buoy growth in the Andean nation.

The yield on Colombia’s 10 percent peso-denominated debt due in July 2024 fell three basis points, or 0.03 percentage point, to 6.80 percent, according to the central bank. The bond’s price rose 0.242 centavo to 125.688 centavos per peso.

Central bank chief Jose Dario Uribe reiterated yesterday the bank will probably lower and narrow the range of its forecast for 2012 Colombian growth from the current projection of 4 percent to 6 percent. The upper limit of the current range is no longer “reasonable,” he told reporters.

Speculation there will be a rate cut mounted after minutes of the central bank’s most recent meeting, released July 13, showed more than one member of the seven-member board voted for a quarter-point interest rate reduction last month and wanted the bank to begin a “relaxation phase.” Banco de la Republica held the overnight lending rate at 5.25 percent for a fourth straight month on June 29 as growth cooled and prices of the country’s commodity exports dropped. The next monetary policy meeting is scheduled for July 27.

Colombia sold its new inflation-linked peso bond due March 2021 to yield 3.59 percent at a government auction today, the Finance Ministry said. Investor demand for the 3.5 percent inflation-linked securities, known as TES UVR, totaled 884 billion pesos ($498 million), compared to the 400 billion pesos offered, the ministry said in a statement.

The peso erased an earlier decline, gaining 0.2 percent to 1,776.23 per dollar. It’s up 9.1 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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