Colombia Bond Yields Fall on Forecasts for Slowing Inflation

Colombia’s peso bonds gained for a fourth day as speculation that inflation slowed in July buoyed demand for fixed-rate securities.

The yield on the government’s 10 percent peso-denominated debt due in 2024 fell six basis points, or 0.06 percentage point, to 6.60 percent, according to the central bank. The bond’s price rose 0.55 centavo to 127.525 centavos per peso.

Today’s rally extended the decline in yields on the benchmark bonds to 17 basis points since the central bank unexpectedly cut interest rates a quarter percentage point to 5 percent on July 27. Annual inflation slowed to 3.11 percent in July from 3.2 percent the previous month, according to the median forecast of 24 economists in a Bloomberg survey. The national statistics agency is slated to release figures Aug. 4.

“After the rally following the rate cut, inflation bets continue to help bonds,” said Jorge Cardozo, an analyst at Bogota-based brokerage Corredores Asociados SA. “Declines in food prices will probably drive inflation lower.”

The peso weakened 0.2 percent to 1,790.50 per U.S. dollar, paring its gain this year to 8.3 percent, still the best performance among all currencies tracked by Bloomberg.

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