Colombia Peso Bond Yields Hold at Record on Inflation, Growth

Yields on Colombia’s peso bonds held at a record low on speculation inflation slowed in September and investment in public works will buoy economic growth.

The yield on the government’s 10 percent peso-denominated bonds due in July 2024 was little changed at 6.28 percent, according to the central bank, remaining at the lowest closing level since the debt was first sold in 2009.

“Investors have been getting out of the short end of the curve and going into the long end as they see inflation falling,” said Alejandro Reyes, the head analyst at Ultrabursatiles brokerage in Bogota. “Given investment in public works, the central bank might have been underestimating growth and in that sense there is not much room to cut rates further.”

Annual inflation slowed to 2.95 percent in September, according to the median estimate of 26 economists surveyed by Bloomberg before the Oct. 5 report. The central bank targets inflation between 2 percent and 4 percent.

Banco de la Republica kept the overnight lending rate at 4.75 percent on Sept. 28, matching the forecast of 22 economists surveyed by Bloomberg. Twelve had expected a 25 basis point cut.

Spending on public works rose 23 percent in the second quarter from a year ago, according to government figures. Colombia announced last month it would offer 30 highway tenders worth 40 trillion pesos ($22 billion). More than 8,000 kilometers (4,971 miles) of highways will be built in six years, according to the infrastructure agency.

Colombia’s economy grew 4.9 percent in the second quarter from a year earlier, according to a Sept. 20 report, beating the forecasts of all 29 analysts surveyed by Bloomberg.

The peso declined 0.2 percent to 1,802.62 per U.S. dollar, paring its rally this year to 7.5 percent, the fifth-best performance among world currencies tracked by Bloomberg.

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