Peruvian Bonds Poised for Biggest Two-Day Rally in Almost Year

Peruvian bonds were headed for their largest two-day gain in 10 months on speculation the domestic economy will weather Europe’s sovereign-debt turmoil.

The price of the nation’s 7.84 percent sol-denominated bond due in August 2020 rose 0.45 centimo to 120.32 centimos at 1:22 p.m. in Lima, extending its two-day increase to 1.22 centimos, the most on a closing basis since Aug. 24. The yield dropped six basis points, or 0.06 percentage point, to 4.76 percent.

“Domestic demand for the most part is still quite resilient,” said Siobhan Morden, the head of Latin America fixed-income strategy at Jefferies Group Inc. in New York. “There’s a lot of liquidity and it’s got to go somewhere. You’d rather be in Peruvian or Mexican credit risk than European credit risk because they offer a growth differential.”

The sol appreciated 0.2 percent to 2.6290 per U.S. dollar according to Deutsche Bank AG’s local unit.

Peru’s economic activity probably expanded more than 5 percent in May after 4.4 percent growth in April, Banco de Credito del Peru said in a note e-mailed to clients yesterday.

The Andean country’s economy will expand almost 6 percent this year, bolstered by domestic demand and a recovery in China, Peru’s central bank President Julio Velarde said in an interview yesterday in Shanghai.

Policy makers in Peru will keep their target lending rate at 4.25 percent for a 14th straight meeting, according to the median forecast in a Bloomberg survey of economists.

The yield on Mexican local-currency bonds due in 2024 fell five basis points, or 0.05 percentage point, to 5.38 percent, according to data compiled by Bloomberg. The price rose 0.57 centavo to 141.81 centavos per peso.

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

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