The yield on Peru’s benchmark bonds due 2020 fell the most in a week, narrowing the gap with the country’s bonds due 2015 from the widest level in two years.
The yield on the bonds due in 2020 fell five basis points to 3.69 percent today. The yield differential, or spread, between the 2020 bonds and the notes due in 2015 narrowed to 156 basis points, or 1.56 percentage points. That spread reached 164 basis points on Jan. 18, the widest since July 2010.
The gap between the two bonds widened last week as international investors poured into shorter-dated Peruvian bonds on bets the sol was undervalued. The currency posted its first weekly decline since November as the central bank bought $970 million in the foreign-exchange market, stepping up efforts to restrain the sol’s appreciation.
The weakness in the sol “was an opportunity to come in and take positions,” said Alberto Jabiles, a fixed-income trader at Banco Continental SA in Lima. “The only way to do that is buying bonds, and to avoid the rate volatility it’s better to buy short bonds. So the spread to the 2020 got very wide and that made the 2020 attractive.”
The sol was little changed today at 2.5535 per U.S dollar, according to prices compiled by Bloomberg.
International investors account for more than half of Peru’s government bond market, according to November data from the Finance Ministry.
Peruvian bonds are attractive because of “appealing yields, low currency volatility and strong economic fundamentals,” Credit Suisse AG strategist Daniel Chodos in New York wrote today in an e-mailed note to clients.