Colombia Peso Bond Yields Fall to One-Week Low on Rate Outlook

Yields on Colombia’s peso bonds fell to a one-week low as investors speculated the central bank would refrain from increasing borrowing costs at a meeting today.

The seven-member board, led by bank chief Jose Dario Uribe, kept the overnight lending rate at 5.25 percent, matching the forecast of all 29 economists surveyed by Bloomberg. The decision was unanimous, Uribe told reporters after the meeting. The announcement came after 1 p.m. Bogota time when Colombia’s foreign-exchange and bond markets close. Uribe also said the central bank extended its daily dollar purchases for at least three more months to Nov. 2.

“The economy is growing but not as much as last year, and inflation is under control,” said Francisco Chaves, a strategist at brokerage Corredores Asociados in Bogota. “The central bank has room to wait and see what future data show.”

The yield on Colombia’s 9.25 percent peso-denominated debt due in May 2014 fell one basis point, or 0.01 percentage point, to 5.82 percent, according to the central bank. That’s the lowest level on a closing basis since April 20. The bond’s price was at 106.406 centavos per peso.

Banco de la Republica has raised the benchmark rate nine times since February 2011 from a record low 3 percent. Policy makers will raise the target rate to 5.5 percent by year-end to curb lending, Chaves forecasts.

While the pace of growth in consumer lending has fallen “slightly, it’s still not a significant” drop, Uribe told reporters.

Consumer Credit

“Inflationary risks originating from expectations have moderated,” the central bank said in the statement announcing the decision. “Those that may come from the behavior of consumer credit prevail.”

In a bid to ease gains in the peso, Banco de la Republica will buy a minimum of $20 million daily in the spot market until at least Nov. 2, Uribe said.

Colombia’s peso rose 0.1 percent to 1,762, from 1,764.40 on April 27. It advanced 1.5 percent this month and has rallied 10 percent this year in the second-best performance after the Hungarian forint among all currencies tracked by Bloomberg.

Chaves sees the peso appreciating toward 1,733 by the beginning of June as foreign investment rises.

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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