Peru Yields Fall as Copper and Gold Gains Boost Currency Outlook

Peru’s sol-denominated bonds rose, pushing down yields for a second day, as increasing prices for copper and gold, the country’s top exports, bolstered the outlook for the local currency.

The yield on the nation’s benchmark 7.84 percent sol- denominated bond due August 2020 fell four basis points, or 0.04 percentage point, to 4.27 percent, according to prices compiled by Bloomberg. The price rose 0.32 centimo to 123.51 centimos per sol.

Copper and gold advanced amid speculation policy makers will take steps to spur growth in China, the world’s largest consumer of industrial metals. Peruvian bond yields touched record lows last week after the sol rose to its strongest level against the dollar in 15 years. The sol is the best performing emerging-market currency in the past year after the Chilean peso, according to prices compiled by Bloomberg.

Investors are betting the sol “will get stronger in the coming weeks,” said Gonzalo Navarro, the head trader at Banco Santander in Lima. “It would already be at 2.53 if it weren’t for” the central bank buying dollars.

The sol closed unchanged at 2.5950 per U.S. dollar, according to Deutsche Bank AG’s local unit. The currency touched 2.59 on Sept. 17, the strongest level since 1997, data from Peru’s financial regulator show.

The central bank bought $100 million in the spot market today and paid an average 2.5946 soles per dollar. It has purchased a record $11 billion this year to stem gains in the sol.

Peru will post a trade surplus this year as commodity export volumes will increase, though prices will be below last year’s level, Trade Minister Jose Silva told reporters in Lima today.

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