Colombia Bond Yields Fall on Rate Cut Prospects; Peso Declines

Colombia’s peso bond yields dropped on speculation the central bank will lower borrowing costs today for a sixth consecutive month.

The yield on Colombia’s benchmark bonds due in July 2024 fell one basis point, or 0.01 percentage point, to 4.84 percent at 9:38 a.m. in Bogota, according to the central bank. The bond’s price rose 0.101 centavo to 143.905 centavos per peso. Three-month swap rates were little changed at 3.01 percent after trading at a record low 3 percent for the past four days.

“All eyes are on today’s central bank meeting, so we’ll probably have little volume as the market awaits the decision,” Camila Estrada, the head analyst at Helm Bank SA in Bogota, said in a telephone interview.

Banco de la Republica will lower the target lending rate by a quarter-percentage point to 3 percent, according to 12 of 31 economists surveyed by Bloomberg. The rest forecast that the central bank will hold the benchmark at 3.25 percent. Policy makers have lowered the target rate 2 percentage points since the cycle of cuts began in July to revive economic growth.

The peso dropped 0.1 percent to 1,832.36 per U.S. dollar, extending its decline this year to 3.5 percent as the central bank and the government increased dollar purchases to ease the local currency’s rally. The peso surged 9.7 percent in 2012.

Banco de la Republica said Jan. 28 it will buy a minimum of $30 million a day, increasing purchases in the currency market to at least $3 billion from February to May. Central bankers will extend the bank’s dollar-purchase program at today’s meeting to September, Estrada predicts.

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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