Peruvian dollar-denominated bonds gained as signs the Federal Reserve will keep U.S. borrowing costs at a record low boosted demand for higher-yielding, emerging-market assets.
The yield on the nation’s benchmark 6.55 percent dollar-denominated bond due March 2037 fell one basis point, or 0.01 percentage point, to 4.6 percent at 11:27 a.m. in Lima. That’s the lowest yield since the security was issued in 2007. The price rose 0.21 cent to 128.71 cents per dollar.
Fed Vice Chairman Janet Yellen endorsed the central bank’s view that borrowing costs are likely to stay low through 2014 to prop up the world’s largest economy. The Fed Bank of New York President William C. Dudley said it’s “still too soon to conclude that we are out of the woods.” The Bank of Japan will pursue “powerful easing” to overcome deflation, Governor Masaaki Shirakawa said today after policy makers kept their key rate between zero and 0.1 percent.
“People just can’t find yield anywhere,” Enrique Alvarez, head of Latin America fixed-income research at IdeaGlobal, said by phone from New York. The Fed officials’ comments suggest “you may have a longer period of zero interest rates” and “there may be more liquidity if needed.”
Peru’s central bank will probably keep borrowing costs unchanged at 4.25 percent for an 11th month at a meeting today, according to all 10 economists in a Bloomberg survey.
The sol strengthened 0.1 percent to 2.66 per U.S. dollar, from 2.6620 yesterday, according to Deutsche Bank AG’s local unit.
The extra yield investors demand to own Peruvian government bonds instead of U.S. Treasuries fell seven basis points to 164, according to JPMorgan Chase & Co.