Colombia Yields Decline on Inflation Outlook; Peso Strengthens

Colombian peso bond yields fell as speculation that annual inflation slowed this month boosted demand for the fixed-rate securities.

Yields on Colombia’s benchmark peso-denominated bonds due in 2024 fell one basis point, or 0.01 percentage point, to 5.02 percent at 11:31 a.m. in Bogota, according to the central bank. It fell to 4.97 percent on Feb. 22, the lowest level since the securities were issued in 2009.

Annual inflation slowed to 1.91 percent in February from 2 percent the previous month, according to the median estimate of 13 economists surveyed by Bloomberg. That’s below the lower end of the central bank’s target rage of 3 percent plus or minus one percentage point. The national statistics agency is slated to publish its monthly consumer prices report on March 5.

“We should start to see a bit more volatility in bonds as investors start to price in inflation expectations,” Jorge Cardozo, a fixed-income analyst at Corredores Asociados SA brokerage, said in a telephone interview from Bogota. “Inflation will come in lower than the target range,” boosting the returns for the fixed-rate securities, he said.

The government today auctioned 400 billion pesos ($220 million) of fixed-rate bonds, known as TES. The Finance Ministry sold November 2018 securities to yield 4.46 percent, May 2022 to yield 4.74 percent and April 2028 to yield 5.18 percent. Demand was 1.7 times the amount offered, the ministry said in an e- mailed statement.

The peso advanced 0.1 percent to 1,815.75 per U.S. dollar. It closed yesterday at 1,817.81, the weakest closing level since Nov. 28. The peso has declined 2.7 percent in 2013 as the government and central bank announced increased dollar purchases to stem a rally that sent the local currency 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

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