Colombian Bonds Decline as Inflation Surprises at Six-Year High

Updated on

Colombia’s peso bonds dropped to a one-month low after the government reported that annual inflation unexpectedly accelerated to the fastest pace in six years as food prices increased.

The nation’s benchmark local debt maturing in 2024 fell 0.27 centavo to 120.62 centavos per peso at the close in Bogota, the lowest level since April 1, according to data from the central bank. The yield rose for a fourth straight day, climbing four basis points, or 0.04 percentage point, to 6.90 percent.

The government reported Tuesday that consumer prices rose 4.64 percent in the 12 months through April, compared with a smaller increase of 4.42 percent forecast by economists surveyed by Bloomberg. Even as inflation remains above the 4 percent upper limit of the central bank’s preferred range, policy makers will leave the target lending rate at 4.5 percent through year-end, according to Nader Nazmi, a Latin America economist at BNP Paribas SA.

“The central bank will remain vigilant against inflation, but it will not engage in a quixotic food fight,” Nazmi wrote in a research note to clients.

Central bank co-director Adolfo Meisel said in a phone interview Wednesday that a surge in food prices and import costs will dissipate in the second half of the year.

Colombia’s peso jumped 1.3 percent to 2,360.27 per U.S. dollar, erasing this year’s drop. The currency has risen 0.7 percent in 2015.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE