Peruvian Bonds Rise to Five-Month High on Bets Inflation to Ease

Peruvian bonds rose to a five-month high on bets slower global growth will cause inflation pressures to ease in the South American country.

The yield on the nation’s benchmark 7.84 percent sol- denominated bond due August 2020 fell three basis points, or 0.03 percentage point, to 6.08 percent at 3:18 p.m. in New York, according to data compiled by Bloomberg. The bond’s price rose 0.22 centimo to 112.04, the highest since Feb. 23.

Investors are revising the outlook for Peru’s economy as slower global growth risks curtailing output for the Andean nation’s metal exports. Reduced world demand will help cool inflation in Peru and lead the central bank to keep interest rates unchanged until next year, said Gustavo Rangel, an economist at ING Financial Markets in New York.

“The Fed’s very dovish announcement of monetary policy and the growth outlook added downside risk to yields in the U.S.,” Rangel said. “The same is happening in Latin America. It’s the incorporation of downside risk for growth, so there’s no need for central banks to raise anymore.”

The Federal Reserve vowed Aug. 9 to keep its benchmark interest rate near zero through at least mid-2013 and signaled it may expand record monetary stimulus as the world’s largest economy grows more slowly than it was expecting.

Peru’s central bank will probably keep its benchmark lending rate at 4.25 percent for a third month when it meets today, according to 20 of 21 economists surveyed by Bloomberg. The central bank increased the rate to a two-year high in May, after inflation accelerated the most since 2008. The bank will announce its decision at about 7 p.m. New York time.

Economic Outlook

The Peruvian economy will grow 6.5 percent to 7 percent this year and 6 percent in 2012, Walter Bayly, chief executive officer of Credicorp Ltd., Peru’s largest financial services company, said during a conference call with analysts today.

The sol gained 0.2 percent to 2.7445 per U.S. dollar, from 2.7505 yesterday.

The central bank didn’t buy or sell dollars in the spot currency market today.

To contact the reporter on this story: John Quigley in Lima at jquigley8@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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