Colombia Peso Bonds Rally as Lawmakers Debate Tax Break Plan
Colombian bonds advanced after the head of the country’s tax agency said the government was discussing a compromise with lawmakers on proposals to reduce taxes on foreigners’ bond profits.
The yield on the government’s 10 percent peso-denominated bonds due in July 2024 fell three basis points, or 0.03 percentage point, to 5.98 percent at 9:17 a.m. in Bogota, according to the central bank. The price rose 0.273 centavo to 132.895 centavos per peso.
The government is pressing lawmakers to reduce the tax rate below the 25 percent they have proposed, Juan Ricardo Ortega, head of the tax agency said today on Javeriana radio. The tax rate now is 33 percent.
“The market is very much on the lookout for these debates,” said William Florez, an analyst at Helm Bank SA’s brokerage in Bogota. “The tone of it is getting more political and less economic, and those political issues can generate a lot of instability.”
Domestically issued bonds tumbled earlier this week after congress proposed the 25 percent rate, above the 14 percent level President Juan Manuel Santos advocated in November.
A surprise drop in Colombian consumer prices last month means inflation at the end of 2013 may be below the 3 percent mid-point of the central bank’s target range, Jose Dario Uribe, the bank’s governor, said yesterday.
The bank could trim its 2013 forecast after measures of so- called “core” inflation, which exclude volatile food and fuel prices, slowed, Uribe said in an interview at the bank’s Bogota headquarters. Policy makers’ current forecast is for prices to rise 3 percent next year, in line with the target.
The peso was little changed at 1,794.64 per U.S. dollar.
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