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Colombia Yields Decline on Inflation Outlook; Peso Strengthens

Feb. 27 (Bloomberg) -- Colombian peso bond yields fell as speculation that annual inflation slowed this month boosted demand for the fixed-rate securities.

Yields on Colombia’s peso bonds due in 2026 decreased one basis point, or 0.01 percentage point, to 5.20 percent, according to the central bank. They dropped to 5.17 percent on Feb. 22, the lowest since the securities were issued in 2011.

Annual inflation slowed to 1.91 percent in February from 2 percent in the previous month, according to the median estimate of 13 economists surveyed by Bloomberg before the national statistics agency’s report March 5. That is below the lower end of the central bank’s target rage of 3 percent plus or minus one percentage point.

“We should start to see a bit more volatility in bonds as investors start to price in inflation expectations,” Jorge Cardozo, a fixed-income analyst at Corredores Asociados SA brokerage, said in a telephone interview from Bogota. “Inflation will come in lower than the target range,” boosting the returns for the fixed-rate securities, he said.

The government auctioned today 400 billion pesos ($221 million) of fixed-rate bonds, known as TES. The Finance Ministry sold November 2018 securities to yield 4.46 percent, May 2022 debt to yield 4.74 percent and April 2028 securities to yield 5.18 percent. Demand was 1.7 times the amount offered, the ministry said in an e-mailed statement.

The peso climbed 0.2 percent to 1,813.91 per U.S. dollar at the close of trading in Bogota. It ended yesterday at 1,817.81, the weakest since Nov. 28.

The currency has declined 2.6 percent in 2013 as the government and central bank announced increased dollar purchases to stem a rally that sent the local currency to a 17-month intraday high on Jan. 2.

To contact the reporter on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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