Colombian Yields Fall to Record on Rate Cut View; Peso Declines

Colombia’s peso bond yields dropped to a record low on mounting speculation policy makers will cut interest rates further after inflation slowed in January more than economists forecast.

The yield on government securities due in 2024 fell three basis points, or 0.03 percentage point, to 5.09 percent at the close of trading in Bogota, the lowest since the securities were first issued in 2009, according to the central bank.

Annual inflation slowed to 2 percent in January, the lowest rate since April 2010, from 2.44 percent in the previous month, the government reported Feb. 5. Policy makers will lower the overnight lending rate by “at least” a quarter-percentage point to 3.75 percent, according to Daniel Escobar, the head analyst at Global Securities in Bogota.

“For those of us who weren’t expecting more cuts, the inflation report changed our mind,” said Escobar, who now expects a reduction at the central bank’s Feb. 22 meeting.

The January inflation reading was lower than all 25 forecasts compiled by Bloomberg. Banco de la Republica, which has cut the benchmark lending rate by 1.25 percentage points since July, has an inflation target of 2 percent to 4 percent. Colombia has the lowest inflation rate among major Latin American economies after Chile.

The peso weakened 0.1 percent to 1,792.33 per U.S. dollar today and has fallen 1.2 percent in the past month.

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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