Peru Dollar Bonds Gain as Fujimori Rises in Presidential Poll

Peru’s dollar bonds rose, pushing down the average yield gap over U.S. debt to a one-month low, after a poll showed support for Congresswoman Keiko Fujimori increased as she and former army officer Ollanta Humala remained locked in a virtual tie before June’s run-off presidential election.

The extra yield investors demand to own Peru government bonds instead of U.S. Treasuries fell five basis points, or 0.05 percentage point, to 185 at 4:44 p.m. New York time, according to JPMorgan Chase & Co. That’s the lowest since April 13.

Peru’s benchmark stock index posted its biggest gain in two years last week, and the nation’s currency and bonds rose, after polls showed support declining for Humala, who topped the field in the first round of elections April 10. Humala’s campaign platform includes increasing state control of the country’s gas reserves and revising contracts with foreign investors and trading partners.

“People are extrapolating from the trend,” Joe Kogan, head of emerging markets strategy at Scotia Capital Markets Inc., said in an interview from New York. “The chance is still 50-50 for a Keiko win, so things can still go either way, but for now, that trend is what has helped markets recover.”

Fujimori had 41 percent support in the most recent survey by Ipsos Apoyo, a Lima-based research company, compared with 38 percent a week earlier. Humala, leader of Peru’s Nationalist Party and a one-time ally of Venezuelan President Hugo Chavez, had 39 percent in the survey, unchanged from the previous week. The poll was published yesterday by America Television.

‘Least Worst Option’

“Support for Keiko Fujimori is rising because the middle classes see a risk of Ollanta Humala turning into a Chavez,” said Alfredo Torres, director of Ipsos Apoyo, in an e-mail, referring to Venezuelan President Hugo Chavez. “They are going for the least worst option.”

The Lima General Index jumped 11 percent last week, the steepest weekly increase since May 2009, and the sol strengthened the most since January 2010, as investors bet Fujimori will win the presidency and maintain policies behind Latin America’s fastest-growing major economy of the last five years.

The Lima index erased earlier gains today and dropped 0.8 percent to 21,598.84. The sol rose for a fourth day, strengthening 0.2 percent to 2.7925 per dollar.

Fujimori is the eldest daughter of former President Alberto Fujimori, who is serving a 25-year prison sentence for directing a death squad while president from 1990-2000. She backs policies of current President Alan Garcia that favor increased foreign investment and privatization.


“The Peruvian electorate is volatile, with a relatively small portion of both candidates’ support expressing total conviction of their voting preferences,” Barclays Capital economists including Alejandro Arreaza and Alejandro Grisanti wrote in a report today. “Therefore, even if, according to the polls, Mrs. Fujimori seems to be the favorite, we believe the results are still too close to call.”

According to the Ipsos Apoyo poll, 20 percent of those surveyed are either undecided or would cast a blank vote. Ipsos Apoyo said 38 percent of those surveyed said they will never vote for Humala and 34 percent would never vote for Fujimori.

Humala, a former army lieutenant colonel, seems as authoritarian as Chavez, according to 47 percent of those surveyed, the poll shows.

America Television didn’t say how many people Ipsos Apoyo interviewed and didn’t provide the dates of the poll or its margin of error.

According to a separate poll published yesterday by Datum Internacional, Humala had 40 percent support compared with 42 percent in a poll published April 29. Fujimori had 39 percent, down from 40 percent, according to Datum’s survey of 5,010 people, which was published by Lima-based television station Frecuencia Latina and didn’t provide a margin of error.

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