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Peru Sol Bonds Advance as Fed Stimulus Boosts Appetite for Yield

Peru’s sol-denominated bonds rose, pushing down yields for a sixth straight day, as the Federal Reserve expanded monetary stimulus fuels demand for higher-yielding, emerging market assets.

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 a record low of 4.21 percent, according to prices compiled by Bloomberg. The price climbed 0.27 centimo to 123.98 centimos per sol.

The yield has dropped 21 basis points since Sept. 13 when the Fed said it will make open-ended purchases of mortgage debt until the economy recovers and keep the benchmark interest rate near zero until at least mid-2015. Peru’s economic growth and an overnight rate of 4.25 percent is a draw for foreign investors, said Diego Alvarez, a trader at Banco Internacional del Peru.

“The monetary stimulus is having a positive impact on the belly of the curve,” Alvarez said by phone from Lima. “The gains in the long end are smaller because investors are expecting a steepening in the Treasury curve given the outlook for inflation.”

Fed Bank of Dallas President Richard Fisher said the U.S. central bank’s third round of bond purchases will probably fail to create jobs while risking faster inflation.

The sol was little changed at 2.6030 per U.S. dollar, from 2.6020 yesterday, according to Deutsche Bank AG’s local unit.

Peru’s central bank bought $20 million in the spot currency market today and paid an average of 2.6030 soles per U.S. dollar, it said on its website.

The yield on the nation’s benchmark 6.55 percent dollar-denominated bond due March 2037 fell seven basis points, or 0.07 percentage point, to 3.71 percent, according to Bloomberg prices. The bond’s price rose 1.38 cent to 145.50 cents per dollar.

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