Colombia’s peso bonds gained, pushing yields on benchmark securities lower, as inflation within the central bank’s target and speculation policy makers will reduce borrowing costs as soon as tomorrow buoyed appetite for the local debt.
The yield on the nation’s 10 percent peso-denominated debt due in July 2024 fell three basis points, or 0.03 percentage point, to 6.74 percent at 10:33 a.m. in Bogota, according to the central bank, the lowest level on a closing basis since the securities were first sold in 2009. The price of the bonds, known as TES, rose 0.27 centavo to 126.255 centavos per peso.
“The market is anticipating one or two cuts between now and the end of the year,” William Florez, an analyst at Helm Bank SA (PFBHELMB)’s brokerage unit in Bogota, said in a phone interview. “Inflation is low, making real rates attractive.”
Colombia’s central bank will lower the overnight lending rate in tomorrow’s meeting by a quarter percentage point to 5 percent, according to 11 of 34 economists surveyed by Bloomberg. Twenty-three expect policy makers to keep the key rate unchanged at 5.25 percent for a fifth straight month.
Annual inflation slowed to 3.20 percent in June from 3.44 percent in May and within the central bank’s target of 2 percent to 4 percent.
The peso climbed for a second day, gaining 0.5 percent to 1,789.45 per dollar. It has jumped 8.3 percent this year, the best performance among all currencies tracked by Bloomberg.
Colombian President Juan Manuel Santos urged Banco de la Republica to cut interest rates after recent data showed the economy losing speed. In a July 20 speech to mark Colombian Independence Day, he also reiterated that the central bank should step up daily dollar purchases to ease gains in the peso.
Colombia’s Minister of Commerce, Industry and Tourism Sergio Diaz-Granados also asked Banco de la Republica to increase dollar purchases and take further measures to stem the currency’s rally which hurts coffee, banana and flower exporters.
Policy makers have said the central bank will buy a minimum of $20 million daily in the spot market until at least Nov. 2.
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