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Peruvian Sol Bonds Fall as European Woes Hurt Risk Demand

Peruvian bonds fell, pushing yields on benchmark securities higher for a third day, as concern that Europe’s debt crisis is worsening hurt demand for higher- yielding, emerging-market assets.

The yield on the nation’s 7.84 percent sol-denominated bond due in August 2020 rose five basis points, or 0.05 percentage point, to 4.7 percent, according to prices compiled by Bloomberg. The price fell 0.33 centimo to 120.70 centimos per sol.

“There is fear in the market today amid the continuing developments in Europe,” said Diego Llona, a fixed-income trader at Banco Santander in Lima. “While in the last few weeks we saw appetite for Peruvian bonds, the recent developments in Europe are hurting the long end” of Peru’s local bond curve, he said.

Global stocks fell amid speculation Europe’s sovereign-debt crisis is threatening to engulf Spain and Italy and on a report that Greece may miss debt-reduction targets and require more restructuring. Moody’s Investors Service cut its ratings outlook for Germany and the Netherlands yesterday saying the increasing likelihood of collective support for European countries including Spain and Italy is “adversely” affecting the Aaa credit ratings of the two nations.

New Ministers

Peruvian President Ollanta Humala swore in six new ministers yesterday led by his former justice minister as he seeks to jump start talks with protesters who have blocked the country’s biggest investment project. Juan Jimenez, Humala’s third Cabinet chief in less than a year, replaces Oscar Valdes. Humala, who also named his fourth interior minister, retained Finance Minister Miguel Castilla, Energy & Mines Minister Jorge Merino and Foreign Trade Minister Jose Silva.

Given there was no change in the Finance and Mining ministers, the reshuffle is having little impact in the local market, Felipe Hernandez, an analyst at RBS Securities Inc., said in a phone interview from Stamford, Connecticut.

The sol closed little changed at 2.6365 per U.S. dollar, from 2.6375 yesterday, according to Deutsche Bank AG’s local unit.

The central bank said on its website that it didn’t buy dollars in the spot market today. So far this month, it has purchased $745 million to slow the sol’s advance.

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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