Colombia Bond Yields Drop to One-Month Low as Inflation Slows

Colombia’s peso bonds rose, pushing yields on benchmark securities to a one-month low, on speculation policy makers may leave interest rates unchanged the rest of this year after inflation unexpectedly slowed.

The yield on the nation’s 9.25 percent bonds due in May 2014 fell four basis points, or 0.04 percentage point, to 6.14 percent, according to the stock exchange. That’s the lowest closing level since Feb. 7. The price jumped 0.078 centavo to 106.142 centavos.

Consumer prices rose 0.61 percent in February compared to a 0.73 percent increase in January, the national statistics agency said in a report late yesterday. Inflation was forecast to quicken to 0.79 percent, according to the median estimate of 27 economists surveyed by Bloomberg.

“Inflation was pretty low and the whole bond curve is reacting,” said William Florez, an analyst at Helm Bank SA (PFBHELMB)’s brokerage unit in Bogota. “Should inflation continue with this positive trend, the central bank will leave rates unchanged through the remainder of the year.”

Banco de la Republica increased the overnight lending rate 25 basis points to 5.25 percent on Feb. 24 in a decision that wasn’t unanimous. Florez said he now expects policy makers to leave the key rate unchanged through year-end after previously forecasting an additional increase to 5.5 percent.

Annual inflation was 3.55 percent last month, compared to 3.54 percent in January and within the central bank’s 2 percent to 4 percent target.

The Colombian peso slid 0.5 percent to 1,780.68 per U.S. dollar from 1,772.20 yesterday. The currency has advanced 8.6 percent in the past three months, the best performance among 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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