Colombia Yields Fall to Record as U.S. Jobs Report Buoys Risk

Colombia’s peso bond yields fell to a record low as evidence of recovery in the U.S. job market boosted the South American nation’s higher-yielding assets.

Colombia’s proposed reduction in the withholding tax that international investors pay on fixed-income assets supported demand for peso bonds, said Daniel Lozano, the head analyst at Serfinco SA in Bogota.

“There’s a search for yield, and foreign investors are looking to participate in the local assets,” Lozano said. “The tax proposal is also something that attracts investors, but people have to be careful since the tax bill needs to be approved by Congress before it becomes a reality.”

The yield on the government’s 10 percent peso-denominated bonds due in July 2024 dropped eight basis points, or 0.08 percentage point, to 6.06 percent, according to the central bank, the lowest level on a closing basis since the debt was first sold in 2009. The price increased 0.812 centavo today to 132.512 centavos per peso.

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

Finance Minister Mauricio Cardenas said in a Javeriana Radio interview today that the government is seeking to reduce its borrowing costs by attracting more foreign investors to local peso bonds, known as TES.

Cardenas’s View

“The whole economy will benefit if we are able to reduce the spread” between TES and peso-linked bonds sold abroad, Cardenas said.

The peso closed little changed at 1,799.30 per U.S. dollar and has rallied 7.7 percent this year.

The local currency will weaken to as low as 1,850 by year- end as foreign companies in Colombia repatriate revenue, said Juan Camilo Rojas, an analyst at Correval SA in Bogota.

Applications for U.S. jobless benefits dropped by 30,000 to 339,000 in the week ended Oct. 6, the fewest since February 2008, Labor Department figures showed today. The decrease may reflect difficulty adjusting the data for seasonal swings at the start of a quarter.

Interest rates near zero in the U.S. and Europe compare with Colombia’s overnight lending rate of 4.75 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

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