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Colombian Peso Bonds Gain as Inflation Expectations Decline

December 01, 2011

Dec. 1 (Bloomberg) -- Colombia’s peso bonds gained the most in seven weeks as investors bet food producers are selling off crops at low prices to cut losses from heavy rains, driving down short-term food prices and inflation expectations.

The yield on the 10 percent bonds due in July 2024 fell eight basis points, or 0.08 percentage point, to 7.56 percent, according to the stock exchange. The decline is the biggest since Oct. 10. The bond’s price rose 0.718 centavo to 119.348 centavos per peso.

“Many producers are selling the little amount they’ve been able to produce at low prices to salvage something from their harvest,” said Camilo Contreras, an analyst at Ultrabursatiles SA. “That means an increase in the market of low quality foods and it also means that if inflation is low this month, it may increase shortly thereafter.”

It will be “very hard” to increase the coffee crop next year in Colombia, the world’s second-largest producer of Arabica coffee beans, if adverse weather persists, Colombia’s National Federation of Coffee Growers Chief Executive Officer Luis Munoz said at a news conference yesterday in Bogota. Above average rainfall has caused a drop in production this year, he said.

The central bank raised the overnight lending rate by 25 basis points to 4.75 percent on Nov. 25, making Colombia the only country in Latin America to raise rates in the past four months.

The peso rose 0.2 percent to 1,946.30 per U.S. dollar, from 1,950.56 yesterday.

--With assistance from Andrea Jaramillo in Bogota. Editors: Glenn J. Kalinoski, Marie-France Han

To contact the reporter on this story: Blake Schmidt in Bogota at

To contact the editor responsible for this story: David Papadopoulos at

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