Colombia Yields Fall Before Central Bank Unexpectedly Cuts Rate

Colombia’s peso bond yields fell to a three-week low before the central bank unexpectedly cut borrowing costs, citing slowing growth in the Andean country.

The yield on the 10 percent peso-denominated bonds due in July 2024 dropped seven basis points, or 0.07 percentage point, to 6.09 percent, the lowest on a closing basis since Oct. 29, according to the central bank. The yield fell 14 basis points this week.

Banco de la Republica lowered the benchmark interest rate by a quarter point to 4.5 percent after the close of trading, as projected by only two of 33 analysts surveyed by Bloomberg. Thirty-one analysts forecast policy makers would leave the rate unchanged. The decision wasn’t unanimous, bank Governor Jose Dario Uribe told reporters.

“This wasn’t expected,” said Andres Pardo, the Bogota- based head analyst at Corp. Financiera Colombiana SA. “We had seen a less dovish bank in last month’s minutes. Yields will drop throughout the curve.”

Yields on the bonds due 2024 had fallen before the rate decision as a second surprise decline in the nation’s industrial output led some investors to bet on a cut, according to Eduardo Bolanos, an analyst at Asesores en Valores brokerage in Bogota.

Colombia’s industrial output dropped 1.3 percent in September, the government’s statistics agency reported Nov. 20, compared with a median estimate for a 0.6 percent increase among analysts surveyed by Bloomberg. It was the second consecutive decline.

Recent data show “a moderation in growth slightly higher than expected,” Banco de la Republica said in its statement, while reiterating its 4.3 percent growth forecast for this year.

The central bank lowered borrowing costs at its July and August meetings, citing slowing global growth that curbed demand for exports.

The peso declined 0.5 percent to 1,823.80 per U.S. dollar. It was little changed this week.

To contact the reporter on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net

To contact the editor responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net

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