Colombian Bond Yields Fall After Interest-Rate Cut; Peso Gains

Colombia’s peso bonds rose, pushing yields down toward a record, after the central bank cut the benchmark rate yesterday to its lowest level among major Latin America economies to boost the nation’s growth.

The peso rose for the first time in three days on speculation policy makers’ decision to boost daily dollar purchases to at least $30 million and buy $3 billion between February and May won’t be enough to stem appreciation. The currency rallied 9.7 percent in 2012, the most among major Latin American currencies, making the nation’s coffee, flower and banana exporters less competitive.

Yields on the government’s 10 percent peso-denominated debt due in 2024 fell one basis point, or 0.01 percentage point, to 5.27 percent at 10:19 a.m. in Bogota, according to the central bank. The price rose 0.067 centavo to 139.974 centavos per peso. Yields closed on Jan. 25 at 5.23 percent, the lowest level since the securities were first issued in 2009.

“The market had already priced in a cut, so we’re going to see a very calm market,” said Jorge Cardozo, an analyst at Bogota-based brokerage Corredores Asociados. “The gains will continue, but we’re seeing a break after the strong rally in the past month.”

Yields have tumbled 40 basis points in January in what would be their eighth monthly drop as traders anticipated the central bank’s fifth rate cut in seven meetings.

Banco de la Republica reduced its benchmark rate by a quarter-percentage point to 4 percent yesterday, as forecast by 31 of 33 analysts surveyed by Bloomberg.

The peso strengthened 0.2 percent to 1,775.92 per dollar, paring its drop in January to 0.6 percent.

“The measures won’t be enough to get the weaker exchange rate that the government in seeking,” Cardozo said.

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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