Peruvian bonds rose, pushing down yields to a four-week low, as gains in the best-performing currency in emerging markets in the past year spur demand for local securities.
The yield on the nation’s benchmark 7.84 percent sol- denominated bond due August 2020 fell five basis points, or 0.05 percentage point, to 5.11 percent, according to prices compiled by Bloomberg. That’s the lowest yield since May 9. The price rose 0.38 centimo to 117.96 centimos per sol.
“The currency is fundamental for investors making decisions about local bonds,” said Manuel Aldave, the head of investments at Banco Internacional del Peru in Lima. “If you’re going to have a stable currency, it makes local paper much more attractive. If it’s going to appreciate, that’s even better.”
Peru’s central bank sold $676 million in the spot currency market last month to limit declines in the sol as Europe’s financial turmoil threatened to engulf Spain. The currency strengthened today as China, Peru’s top trading partner, cut interest rates to revive its slowing economy and as yields on Spanish bonds gained after a debt sale.
The sol rose 0.3 percent to 2.678 per U.S. dollar, from 2.685 yesterday, according to Deutsche Bank AG’s local unit. Its 4 percent appreciation in the past year is the strongest among 25 emerging-market currencies tracked by Bloomberg.
The central bank will probably keep its benchmark interest rate unchanged at 4.25 percent for a 13th month today, according to all 18 economists surveyed by Bloomberg. The bank will announce its decision at about 6 p.m. in Lima.
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