Colombian Bond Yields Hold Near Record Low on Tax-Reduction View

Colombia’s peso bond yields held near a record low on speculation a proposed reduction in the withholding tax for international investors will boost demand for the government securities.

The yield on the 7.5 percent peso-denominated bonds due in August 2026 was little changed at 6.25 percent, according to the central bank. It was 6.24 percent yesterday, the lowest on a closing basis since the debt was first sold in 2011.

Legislation sent to Congress last week would reduce taxes foreigners pay for profits on fixed-income investments to 12.5 percent from 33 percent. Included are government peso bonds sold in the local market and corporate debt.

“The aggressiveness of this rally has been a surprise,” said William Florez, an analyst at Helm Bank SA (PFBHELMB)’s brokerage in Bogota. “One of the big recent drivers is the tax bill, which investors should take with caution since it has to first pass the four debates in Congress.”

Peso bonds, especially the medium-term securities, still have room for gains as inflation remains under control, according to Florez.

Colombia’s annual inflation slowed to 3.08 percent in September, a report showed Oct. 5, within the central bank’s 2 percent to 4 percent target.

“Real rates are attractive,” said Florez.

The peso depreciated almost 0.1 percent to 1,799.99 per U.S. dollar, paring its rally this year to 7.7 percent.

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.