Colombia Bond Yields Drop on Rate Outlook; Peso Little Changed

Colombian bond yields fell to a record on mounting speculation the central bank will lower benchmark borrowing costs at least one more time to shore up economic growth.

The yield on the government’s peso-denominated bonds due in 2024 fell one basis point, or 0.01 percentage point, to 5.08 percent at 8:57 a.m. in Bogota, the lowest level on a closing basis since the securities were first issued in 2009, according to the central bank. The price rose 0.166 centavo to 141.91 centavos per peso.

Banco de la Republica, which has reduced the benchmark lending rate by 1.25 percentage points since July to 4 percent, is next scheduled to meet on Feb. 22. The rate cuts have helped fuel a rally in the government’s local bonds, known as TES, with yields on the 2024 securities falling 59 basis points this year.

“It’s pretty much a given the central bank will cut the rate this month,” said Camilo Perez, head analyst at Banco de Bogota SA, the country’s second-biggest bank. “The bets are now on if they will lower it again after February. It depends on what economic data shows but the chances are high they will lower it again probably in March” to 3.5 percent, said Perez.

The peso traded little changed at 1,785.55 per U.S. dollar and has dropped 1.1 percent this year.

The central bank estimates the economy expanded between 3.3 percent and 3.9 percent in 2012 and may grow about 4 percent this year, according to minutes from its January meeting, which it released on Feb. 8. Growth has slowed from a pace of 5.9 percent in 2011, the fastest since 2007.

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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