Colombian Yields Decline on Bets for More Cuts; Peso Depreciates

Colombian bond yields fell to a record on mounting speculation that policy makers will extend interest rate cuts after President Juan Manuel Santos named two new central bank board members.

Yields on the government’s benchmark peso-denominated bonds due in 2024 dropped two basis points, or 0.02 percentage point, to 4.97 percent at 10:17 a.m. in Bogota, the lowest level since they were issued in 2009.

Santos announced yesterday that he named Deputy Finance Minister Ana Fernanda Maiguashca and Adolfo Meisel, who heads the central bank’s branch in Cartagena, to the seven-member board that sets interest rates. The new members will begin voting at the bank’s March policy meeting, sitting out today’s vote. The remaining five members will reduce the benchmark lending rate by 0.25 percentage point to 3.75 percent, according to a majority of economists surveyed by Bloomberg.

“The market has interpreted the namings as a confirmation today’s cut won’t be the last,” John Jairo Ramirez, a fixed- income analyst at Bolsa y Renta brokerage, said in a phone interview from Medellin.

Maiguashca said in a Feb. 12 interview that the central bank should pursue a range of goals instead of focusing exclusively on inflation.

‘Orthodox’ Economist

Meisel said in an interview in Javeriana radio today that he is an “orthodox” economist who believes in markets and also in state intervention.

“Meisel is seen as dovish as he might be the government’s card to help contain the peso’s gains,” said Ramirez. “Coming from the government, Maiguashca might start out dovish but I think in the longer run she’ll take a more hawkish stance given her background in financial regulation.”

Banco de la Republica has lowered the overnight lending rate 1.25 percentage points since June to 4 percent as economic growth waned and consumer prices rose at the slowest pace in almost three years.

The peso depreciated 0.2 percent to 1,802.23 per U.S. dollar. It has declined 1.9 percent this year as the government and central bank announced increased dollar purchases to stem a rally that sent the peso to a 17-month intraday high on Jan. 2.

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.