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Colombia Yields Fall Near Record Low on Lower Debt Auction Plans

Yields on Colombia’s peso bonds fell toward a record low after the government cut plans for debt auctions, signaling a reduced supply of the securities.

The yield on Colombia’s 6 percent peso-denominated debt due in April 2013 fell eight basis points, or 0.08 percentage point, to 4.70 percent, according to the central bank. The yield reached 4.69 percent Aug. 16, the lowest closing level since the notes were issued in 2009.

Colombia will auction 16.36 trillion pesos ($8.96 billion) of local bonds this year, down from the previously planned 17.36 trillion pesos, the Finance Ministry said yesterday. The remaining 1 trillion pesos will be sold to government institutions, the ministry said. The government had already suspended auctions of short-term notes, known as TCOs, in February.

“There’s a lack of supply of short-term debt and with yesterday’s announcement it will be even greater,” Julian Cardenas, the head analyst at ING Pensiones y Cesantias, said by phone from Bogota.

The government will finish its planned debt auctions for 2012 next month, offering 200 billion pesos of bonds in each of the auctions scheduled for Sept. 12, Sept. 19 and Sept. 26.

The Colombian currency rose, following gains in global equities and commodities, after Federal Reserve Chairman Ben S. Bernanke said today he wouldn’t rule out more stimulus to lower a jobless rate he described as a “grave concern.”

The peso strengthened 0.3 percent to 1,825.20 per U.S. dollar. It’s up 6.2 percent this year, the best performance after the Chilean peso and the Hungarian forint among all currencies tracked by Bloomberg.

August Performance

The peso fell 1.8 percent in August, the worst performance among emerging market currencies tracked by Bloomberg, as the central bank and government step up dollar purchases to ease gains in the local currency.

Colombia’s central bank yesterday bought $35 million in the spot market for a third straight day, up from the minimum of $20 million a day the bank has said it will buy until at least Nov. 2. On Aug. 24 Banco de la Republica said it will boost its dollar purchases to $700 million by the end of September, or an average of $28 million a day.

The Treasury has bought $600 million in recent weeks, in addition to $200 million purchased by Colombia’s bank deposit-guarantee fund, known as Fogafin, outgoing Finance Minister Juan Carlos Echeverry said in an interview yesterday. The purchases will continue under Mauricio Cardenas, who takes over in the next few days, Echeverry said.

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