Colombia 2012 Peso-Bond Yields Rise on Outlook for Rate Increase

Yields on Colombia’s shorter-term peso bonds rose this week to near a four-month high on speculation the central bank will raise interest rates.

The yield on Colombia’s peso bonds due in August 2012 increased 13 basis points, or 0.13 percentage point, to 5.45 percent this week, according to the central bank. Yields were down three basis points today in Bogota.

Colombia will raise interest rates for the 10th time in 13 months today to contain inflation after the economy expanded at the fastest pace since 2007, according to the economists with the best track record of predicting the central bank’s moves.

“Bonds on the shorter end are anticipating at least one more interest rate increase,” said Diego Ochoa, head of research at brokerage Cia. de Profesionales de Bolsa SA. “They have been pricing in a rate increase over the past three days.”

While 16 of 30 analysts surveyed by Bloomberg expect policy makers to hold the benchmark rate at 5.25 percent today, the three most-accurate forecasters in past surveys all predict another quarter-point increase.

The peso was little changed at 1,760.27 per U.S. dollar, from 1,760.45 yesterday. It has gained 10 percent this year, the biggest advance among all currencies tracked by Bloomberg.

To contact the reporter on this story: Christine Jenkins in New York at cjenkins28@bloomberg.net

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

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