Colombia Peso Bond Yields Post Biggest Weekly Drop Since August

Colombia’s peso bond yields posted their biggest five-day drop since August after policy makers unexpectedly cut borrowing costs last week.

The yield on the 9.25 percent peso-denominated bonds due in May 2014 slid 19 basis points, or 0.19 percentage point, this week to 4.95 percent, according to the central bank. The yield was little changed today.

Banco de la Republica lowered the target lending rate by a quarter-percentage point to 4.5 percent on Nov. 23, surprising all except two of 33 analysts surveyed by Bloomberg. Policy makers voted 4-3 to cut borrowing costs to the lowest in a year.

“We’re seeing that gains continued, although they are more moderate, after the central bank’s rate cut,” said Jorge Cardozo, an analyst at Corredores Asociados brokerage in Bogota, referring to the increases in bond prices.

Colombian congressional committees approved legislation yesterday that would cut the tax on foreigners’ profits on local bond holdings to 14 percent from 33 percent. The bill still needs to be approved by the full Lower House and the Senate to become law.

“The market lately has also been pricing in the impact of the reform, but until it’s realized, we won’t be seeing major gains,” Cardozo said in a telephone interview.

The peso was little changed at 1,814.83 per U.S. dollar. It has rallied 6.8 percent this year and 1 percent in November.

To contact the reporter on this story: Christine Jenkins in Bogota at cjenkins28@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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