Nov. 6 (Bloomberg) -- Colombia’s peso bonds rose, pushing yields to their lowest since 2006, after an unexpected decline in consumer prices last month sent annual inflation to the lowest in almost half a century.

The yield on Colombia’s 11 percent bonds due in July 2020 fell 12 basis points, or 0.12 percentage point, to 8.18 percent at 4:41 p.m. New York time, according to Colombia’s stock exchange. The yield earlier fell to as low as 8.15 percent, the lowest level since May 11, 2006.

Consumer prices fell 0.13 percent in October from the previous month, the national statistics agency said in a report late yesterday. Economists had forecast monthly inflation of 0.07 percent, according to the median of 32 estimates compiled by Bloomberg News. Annual inflation slowed to 2.72 percent, the lowest level since 1962.

“The market was expecting inflation to be low but not that low,” said Alexander Cardenas, chief analyst at Acciones y Valores, a Bogota-based brokerage.

Low inflation will allow the central bank to maintain its overnight lending rate unchanged at 4 percent until the second half of 2010, according to Cardenas. Before the October inflation report he expected Banco de la Republica to raise rates in the first half.

‘Near Future’

In minutes released today of the Oct. 23 monetary policy meeting, central bankers said the 2 percent to 4 percent inflation target they set for next year can be reached without increases in the benchmark rate “in the near future.”

Colombia’s peso slipped 0.1 percent to 1,984.55 per U.S. dollar, from 1,982.10 yesterday.

The peso has dropped 3.7 percent in the past month, the biggest drop among 26 emerging-market currencies tracked by Bloomberg.

Ecopetrol SA, Colombia’s state-run oil producer, won’t bring any more dollars into the Andean country this year, a company spokeswoman who declined to be identified because of company policy said today.

The comments follow an Oct. 15 announcement by Finance Minister Oscar Ivan Zuluaga that the government will refrain from selling dollars in the market for the rest of the year after expectations of higher dollar inflows helped push the currency to its strongest since August 2008.

Banco de la Republica also said Oct. 23 that it will spend as much as 3 trillion pesos ($1.5 billion) to buy dollars and government bonds, in a move traders said is a bid to stem the currency’s rally.

Chile, Venezuela, Peru

In Chile, the peso advanced 0.4 percent to 521.55 per U.S. dollar, from 523.65 yesterday. The peso has jumped 6.2 percent in the past month, the best performance among emerging-market currencies.

The yield for a basket of the country’s 10-year peso bonds in inflation-linked currency units, called unidades de fomento, was little changed at 3.05 percent, according to Bloomberg composite prices.

Venezuela’s bolivar climbed 2.8 percent to 5.38 per dollar in unregulated parallel market trading from 5.53 yesterday, traders said. Venezuelans buy dollars in the parallel market when they can’t get government authorization to purchase them at the official exchange rate of 2.15 per dollar.

Peru’s sol slid 0.1 percent to 2.899 per dollar, from 2.8955 yesterday. The yield on Peru’s 8.6 percent sol- denominated bond due August 2017 declined two basis points to 4.96 percent, according to Citigroup Inc.’s local unit.

Markets in Argentina were closed today for a bank holiday.

To contact the reporter on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.netDrew Benson in Buenos Aires at abenson9@bloomberg.net

Last Updated: November 6, 2009 15:52 EST