Peru Bonds Rise on Bet Humala Economic Team to Foster Investment

Peru’s bonds rose to a five-month high after President Ollanta Humala formed an economic team that reassured investors the former army officer will defend economic policies fueling growth.

The yield on the nation’s benchmark 7.84 percent sol-denominated bond due August 2020 fell four basis points, or 0.04 percentage point, to 6.12 percent, according to prices compiled by Bloomberg. The bond’s price gained 0.29 centimo to 111.78 centimos per sol, the highest since Feb. 23.

Finance Minister Miguel Castilla appointed Laura Calderon, a former head of Peru’s tax collection agency, as deputy economy minister yesterday and said Carlos Oliva, a former consultant to the World Bank, will become deputy finance minister. Humala said during his July 28 inaugural speech that his government will respect contracts with investors.

“With these appointments, the new government is guaranteeing there isn’t going to be a radical change in economic policy and the free-market approach will be maintained,” said Roberto Flores, an economist at Inteligo SAB, a Lima-based brokerage. “That’s why there’s been a big influx of non-resident investors into the sovereign curve.”

The yield on the nation’s bonds rose to a two-year high during the presidential election campaign amid concern Humala’s pledges to increase mining royalties, revise a free-trade agreement with the U.S. and enlarge state companies may deter foreign investment. Humala shifted his stance during the campaign to support policies that made Peru the fastest-growing Latin American economy in the last decade.

The sol was little changed at 2.7425 per U.S. dollar, from 2.7430 yesterday.

The extra yield investors demand to own Peruvian government bonds instead of U.S. Treasuries rose 15 basis points to 166, according to JPMorgan Chase & Co.

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