Colombian Peso Bonds Rise as Tax Cut Advances; Peso Appreciates

Colombia’s peso bonds rose, pushing yields down the most in a week, as the Lower House approved a proposal to cut taxes on foreigners’ bond profits to 14 percent.

The yield on the government’s 10 percent peso-denominated securities due in July 2024 fell five basis points, or 0.05 percentage point, to 5.89 percent, the biggest drop since Dec. 6, according to the central bank. The price increased 0.465 centavo to 133.758 centavos per peso.

The Senate hasn’t yet voted on the proposal that the Lower House approved yesterday to cut the tax on foreigners’ bond profits from the current 33 percent. Investors from countries considered tax havens would be taxed at 25 percent, which Finance Minister Mauricio Cardenas favors for all foreigners.

“There is much more gains in betting on the 14 percent than the 25 percent, and so investors prefer to go long on the bonds until we get the final decision,” said Felipe Campos, the head analyst at Alianza Valores brokerage in Bogota. Yields on peso bonds will probably rise if the 14 percent rate is rejected, he said. A long is a bet an asset will gain value.

The central bank will leave the overnight lending rate at 4.50 percent at this year’s last monetary policy meeting on Dec. 21, according to 29 of 31 analysts surveyed by Bloomberg. Two analysts expect a 25 basis point cut to 4.25 percent.

The peso rose 0.1 percent to 1,793.75 per U.S. dollar at the close in Bogota and has rallied 8.1 percent this year.

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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