Colombia Swap Rates Surge as Bank Holds Rate Steady; Peso Rises

Colombia’s swap rates rose the most since October on speculation the central bank won’t cut borrowing costs further after last week’s decision to hold the target lending rate steady.

Banco de la Republica left the target lending rate at 3.25 percent on April 26, refraining from lowering the benchmark for the first time in six months. Twelve of 31 analysts surveyed by Bloomberg had predicted a reduction to 3 percent. Policy makers have decreased borrowing costs two percentage points since they began to cut them in July.

Three-month swap rates climbed nine basis points, or 0.09 percentage point, to 3.07 percent at 9:52 a.m. in Bogota, according to data compiled by Bloomberg. The increase was the biggest on a closing basis since Oct. 1, the first trading day after policy makers cited higher-than-forecast growth and left the target lending rate unchanged on Sept. 28. The yield on benchmark government peso bonds due in July 2024 rose five basis points to 4.90 percent today.

“This looks like a confirmation we’ve reached the end” of the easing cycle, said Camilo Perez, the head analyst at Banco de Bogota SA (BOGOTA), the nation’s biggest bank. “Many had been betting on more than one cut.”

The peso appreciated 0.3 percent to 1,828.60 per U.S. dollar, paring its drop in April to 0.2 percent and its slide this year to 3.4 percent.

The central bank didn’t announce an extension of its dollar purchase program to contain the peso as forecast by analysts including Perez and Eduardo Suarez, a senior foreign-exchange strategist at Bank of Nova Scotia.

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.

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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