Colombian Bond Yields Fall to Record Low as Central Bank Meets

Yields on Colombia’s peso bonds fell to a record low amid speculation policy makers will lower benchmark borrowing costs as soon as today to support growth in the Andean economy.

The yield on the government’s 10 percent peso-denominated bonds due in July 2024 fell one basis point, or 0.01 percentage point, to 6.33 percent at 9:51 a.m. in Bogota, according to the central bank, the lowest closing level since the debt was first sold in 2009. The price rose 0.072 centavo to 129.863 centavos per peso.

Colombia’s central bank will reduce the overnight lending rate by a quarter-percentage point to 4.5 percent by year-end, according to the median estimate of 29 analysts in a Citigroup Inc. survey published Sept. 26. While 12 economists surveyed by Bloomberg forecast a 25 basis-point cut at today’s meeting, 22 expect borrowing costs to remain unchanged.

“The market is seeing more rate cuts this year,” said Ana Milena Franco, an analyst at Acciones y Valores brokerage in Bogota. “The economy is showing signs of slowing and that probably has the central bank worried.” She forecasts two additional cuts this year, including one today, with the key rate ending 2012 at 4.25 percent.

Banco de la Republica lowered the target lending rate in August for a second straight month, reducing it by a quarter- percentage point to 4.75 percent.

The peso fell 0.1 percent to 1,800.75 per U.S. dollar. The currency has fallen 0.9 percent in the third quarter and rallied 7.6 percent this year.

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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