Bloomberg News

Peruvian Sol Bonds Gain Amid Bets for Slowing Annual Inflation

July 30, 2012

Peruvian bonds rose amid speculation annual inflation slowed this month, buoying demand for the fixed-rate securities.

The yield on the nation’s 7.84 percent sol-denominated bond due in August 2020 fell one basis point, or 0.01 percentage point, to 4.66 percent, according to data compiled by Bloomberg. The price today rose 0.05 centimo to 120.96 centimos per sol.

“Increased demand for the local bonds from foreign investors has helped the bonds rally,” said Roberto Flores, the head of research at Inteligo SAB, a Lima-based brokerage. “Investors are taking advantage of the sol’s appreciation and bets it will continue to gain.” Expectations annual inflation will slow to within the central bank’s 1 percent to 3 percent target by year-end is also helping demand, Flores said.

Annual inflation slowed to 3.35 percent in July from 4 percent in the previous month, according to the median estimate of eight economists surveyed by Bloomberg. The national statistics agency is slated to release the monthly report Aug. 1. Flores forecasts inflation will end this year at 3 percent.

The sol depreciated 0.1 percent to 2.6270 per U.S. dollar, according to Deutsche Bank AG’s local unit. It has rallied 1.4 percent this month, the biggest gain among major Latin American currencies after Chile’s peso.

The central bank said on its website that it didn’t buy dollars in the spot market today. So far this month it has purchased $745 million to slow the sol’s advance.

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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