Yields on Peru’s benchmark bonds due in 2020 held within two basis points, or 0.02 percentage point, of a record low even as the steepest yield curve ever attracted foreign investors to longer-dated securities.
The yield on the government’s sol-denominated debt due in 2020 rose one basis point to 3.72 percent at the close of trading in Lima, according to prices compiled by Bloomberg. It closed at 3.70 percent on Jan. 15, the lowest since the securities were first issued in February 2006. The sol was little changed at 2.5535 per U.S. dollar today.
Investors from outside Peru have begun to place bets that the yield curve will flatten with yields on long bonds falling relative to shorter-dated bonds, said Diego Alvarez, a trader at Banco Internacional del Peru in Lima.
“The curve remains near historic lows,” Alvarez said. “We are seeing foreigners selling in the belly of the curve after a long time and buying in the long part. We believe they expect the curve to flatten.”
In the last week, yields on shorter-dated Peruvian government bonds fell while the yield on the longest bonds rose. The yield on Peru’s 9.91 percent debt due in 2015 fell 24 basis points to 2.06 percent since Jan. 15. prices. The yield on its bonds due in 2042 rose eight basis points to 4.93 percent.
The central bank bought $50 million in the spot market today to weaken the sol. It paid an average 2.5543 soles per U.S. dollar.