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Colombia Peso Bond Yields Rise on Rate Outlook; Currency Gains

Colombia’s peso bond yields rose as investors pared bets on further interest rate cuts this year.

The yield on Colombia’s 9.25 percent peso-denominated debt due in May 2014 increased five basis points, or 0.05 percentage point, to 4.94 percent, according to the central bank. The price fell 0.092 centavo to 106.148 centavos per peso.

The central bank held the target lending rate at 4.75 percent on Oct. 26, citing eased risk of a global economic slump and the expanding Colombian economy amid growing domestic demand. While 28 analysts surveyed by Bloomberg expected the rate to remain unchanged, seven projected a reduction of a quarter-percentage point. Policy makers have cut the target rate twice since June from 5.25 percent.

“The market usually takes three or four days to price in expectations after the central bank’s meeting,” said Daniel Lozano, head analyst at Serfinco brokerage in Bogota. “The central bank’s statement was less dovish, increasing the chances it will leave the rate on hold through the remainder of the year.”

Colombia’s peso bonds also fell after Interbolsa SA said its brokerage unit, the biggest in the Andean country, is facing a “temporary” funding shortage.

“That’s creating uneasiness in the market and may have led some of its clients to close positions” including in government debt, said Camilo Perez, the head analyst at Banco de Bogota SA, the nation’s second-biggest bank.

The peso climbed for the first time in 10 days, strengthening 0.4 percent to 1,825.13 per U.S. dollar, extending its gain this year to 6.2 percent.

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