Yields Drop Most in Week as Inflows Spur Currency: Lima Mover

Peruvian bonds rose, pushing down yields the most in a week, as investors bought sol-denominated securities on speculation foreign inflows will bolster the local currency at a 15-year high.

The yield on the benchmark 7.84 percent sol-denominated bond due in August 2020 fell three basis points, or 0.03 percentage point, to 5.29 percent, according to prices compiled by Bloomberg. The price rose 0.24 centimo to 116.85 centimos per sol.

Peru’s central bank has purchased $7.5 billion this year to stem gains in the sol as rising foreign investment in mining and energy projects fuels growth.

“The currency is definitely helping” the country’s bonds, said Manuel Aldave, the head of investment at Banco Internacional del Peru in Lima.

The sol was little changed at 2.6510 per U.S. dollar, compared with 2.6520 yesterday, according to Deutsche Bank AG’s local unit. The currency earlier today touched 2.65, the strongest level since 1997, data from Peru’s financial regulator show. The sol has rallied 1.7 percent this year.

The central bank didn’t buy dollars in the spot market today, it said on its website.

Overseas investors may acquire as much as 50 percent of the $500 million in sol-denominated bonds the government may issue locally this year, boosting demand for soles, Banco Bilbao Vizcaya Argentaria said April 19. The currency will likely strengthen to 2.60 by Dec. 31 because of foreign direct investment and exports, according to the bank.

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