Peru Sol Bonds Advance as Locals Buy Debt Before U.S. Vote Tally

Peruvian bonds rallied, pushing yields down the most in five weeks, as local investors bought the securities following a selloff by foreigners in anticipation of today’s U.S. presidential election.

The yield on the nation’s benchmark 7.84 percent sol-denominated bonds due in August 2020 dropped three basis points, or 0.03 percentage points, to 4.31 percent at 11:43 a.m. in Lima, according to prices compiled by Bloomberg. That is the steepest decrease on a closing basis since Sept. 27. The price rose 0.24 centimo to 112.97 centimos per sol. A decline in the bonds yesterday pushed the yield up seven basis points.

“There was a selloff by offshore investors restructuring their holdings in light of the elections today,” Walther Benavides, a trader at BBVA Banco Continental in Lima, said by phone today. “Local investors see current levels as attractive.”

Foreign investors have reduced their holdings of Peruvian debt during the past week as U.S. polling showed a close race between President Barack Obama and Republican Mitt Romney, Benavides said.

The extra yield investors demand to own Peruvian government dollar bonds instead of U.S. Treasuries decreased two basis points to 113 basis points, according to JPMorgan Chase & Co.

The sol slid 0.3 percent to 2.6105 per U.S. dollar, according to Deutsche Bank AG’s local unit.

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