Peru Yields Rise Most in Two Weeks on Concern Sol Gains to Ease

Peru’s benchmark sol-denominated bonds fell, pushing up yields the most in two weeks, after the central bank’s efforts to weaken the local currency curbed the securities’ appeal.

The yield on the nation’s 7.84 percent bond due August 2020 increased four basis points, or 0.04 percentage point, to 3.78 percent at 2:51 p.m. in Lima, according to prices compiled by Bloomberg. That’s the steepest rise since Jan. 28. The price fell 0.29 centimo to 126.15 centimos per sol.

Peru’s central bank has stepped up efforts to tame the sol, which touched a 16-year high last month, by increasing dollar purchases and raising banks’ reserve requirements. Finance Minister Miguel Castilla said last month the government will buy $4 billion in the currency market to offset increased dollar inflows.

The measures “certainly reduce a little the appeal to buy a bond considering the currency risk in the current environment,” Diego Donadio, a Latin America strategist at BNP Paribas Brasil SA, said by phone from Sao Paulo. “Valuations are extremely stretched” in the Peruvian yield curve, he said.

The sol weakened 0.1 percent to 2.5720 per U.S. dollar at today’s close, according to prices compiled by Bloomberg. The currency reached a 2.5390 on Jan. 14, the strongest level since October 1996, according to data from Peru’s financial regulator.

The central bank said on its website it bought $120 million of U.S. currency today, taking its purchases this year to $2.8 billion.

To contact the reporter on this story: John Quigley in Lima at jquigley8@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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