April 10 (Bloomberg) -- Peru's bonds rose on optimism presidential candidate Lourdes Flores, an advocate for free trade and increased foreign investment, has enough support to advance to and win a runoff next month.

Flores, 46, won 26.3 percent of the vote in yesterday's first-round election, placing second to Ollanta Humala, a nationalist, based on 53 percent of votes counted by the electoral board.

``The markets have seen a positive element in the fact Flores will probably get into the second round and that Humala didn't win by such a large margin,'' Alberto Ramos, Latin America economist with Goldman, Sachs & Co. said in a telephone interview from in New York. ``Investors are now reassessing positions with the idea Flores will win the run-off.''

The yield on Peru's dollar-denominated bond due in 2012, one of the government's most traded securities, fell 30 basis points, or 0.3 percentage point, to 6.71 percent at 9:40 a.m. in New York, according to JPMorgan Chase & Co. at 10:12 a.m. in New York. The bond's price, which moves inversely to the yield, rose 2 cents on the dollar to 111.5 cents.

Michael Gomez, who manages about $28 billion of dollar- denominated emerging market debt for Pacific Asset Management Co. in Newport Beach, California, said a Flores-Humala runoff would be ``welcome news.''

``Flores is generally perceived as market friendly, and also was forecasted in polls to defeat Humala in a second round run-off should that pairing materialize,'' Gomez said in an e- mailed response to questions after exit polls were published last night. Pimco was the largest holder of Peru's 9 1/8 percent bond due 2012 as of January.

Peru's benchmark stock index rose 0.5 percent to 6225.99 at 10:08 a.m. in New York. The currency was unchanged at 3.3585 per dollar.

To contact the reporter on this story: Alex Emery in Lima at at aemery1@bloomberg.net

Last Updated: April 10, 2006 10:14 EDT