Colombian Yields Fall to a Six-Month Low on CPI, Rate Outlook

Colombian peso bonds rose, pushing yields on benchmark securities to their lowest level in almost six months, after investors reduced inflation forecasts and amid speculation the central bank will raise interest rates at a slower pace than analysts initially predicted.

Yields on the country’s 10 percent peso-denominated debt due in July 2024 fell three basis points, or 0.03 percentage point, to 7.27 percent, according to the central bank. That’s the lowest on a closing basis since Sept. 9. The price rose 0.276 centavo to 121.733 centavos per peso.

Annual inflation quickened to 3.74 percent in February from 3.54 percent the previous month, according to the median estimate of 23 economists surveyed by Bloomberg. The central bank targets inflation between 2 percent and 4 percent this year. The national statistics agency is slated to release the monthly inflation report at 7 p.m. Bogota time.

“Some are beginning to forecast inflation wasn’t as high as initially thought,” said Daniel Lozano, an analyst at Serfinco SA brokerage in Bogota. “You also have what seems a less hawkish central bank, which leads investors to price in pauses” in the rate cycle, he said.

Policy makers increased the overnight lending rate 25 basis points to 5.25 percent on Feb. 24 in a decision that wasn’t unanimous. Lozano said he’s sticking to his forecast that the central bank will raise the key rate to 5.75 percent by year- end.

Colombia’s six-month interest-rate swaps, at 5.39 percent today compared to 5.48 percent a week ago, show traders pricing fewer interest-rate increases, according to data compiled by Bloomberg. The swaps reflect traders’ views of the likely average of future benchmark rates during the life of the contract.

The peso erased an earlier decline, gaining 0.1 percent to 1,772.20 per U.S. dollar, from 1,774 on March 2. The currency has advanced 9.2 percent in the past three months, the best performance among 25 emerging-market currencies tracked by Bloomberg.

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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