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Peru Yields Fall to Lowest Since 2006 as Fed Bets Fuel Demand

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Aug. 27 (Bloomberg) -- Peruvian bonds rose, pushing down yields to their lowest level in six years, as speculation the Federal Reserve will expand monetary stimulus spurred demand for higher-yielding, emerging-market assets.

The yield on the nation’s benchmark 7.84 percent sol-denominated bond due in August 2020 fell three basis points, or 0.03 percentage point, to 4.52 percent, according to data compiled by Bloomberg. The price increased 0.19 centimo to 121.86 centimos per sol.

“We continue to see foreign investors seeking yield in the belly of the curve on the expectation the Fed is going to act and yields will fall further,” said Diego Alvarez, a trader at Banco Internacional del Peru.

Treasuries rose as investors wagered Fed Chairman Ben S. Bernanke will use his Aug. 31 speech in Jackson Hole, Wyoming, to outline the case for further central bank action to support the economy. The Fed has already conducted two rounds of asset purchases known as quantitative easing to pump cash into the banking system.

The sol appreciated 0.1 percent to 2.6110 per U.S. dollar, according to Deutsche Bank AG’s local unit.

Peru’s central bank bought $16 million in the spot market to stem gains in the currency. The bank said on its website it paid an average 2.6110 soles per U.S. dollar.

The yield on the nation’s benchmark 6.55 percent dollar-denominated bond due in March 2037 fell one basis point to 3.87 percent, according to Bloomberg prices. The bond’s price rose 0.23 cent to 142.24 cents per dollar.

To contact the reporter on this story: John Quigley in Lima at jquigley8@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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