Colombia Bond Yields Rise to Five-Week High; Currency Declines

Colombia’s peso bond yields climbed to a five-week high on speculation the central bank’s rate cutting will come to an end after this week’s meeting.

Yields on Colombia’s benchmark peso bonds due in 2024 rose nine basis points, or 0.09 percentage point, to 5.10 percent at the close of trading in Bogota, the highest level since Feb. 8, according to the central bank.

The yields on the benchmark securities have fallen 57 basis points this year as the central bank cut the overnight lending rate by 150 basis points since July. Banco de la Republica will lower borrowing costs by 25 basis points to 3.5 percent on March 22, according to the majority of analysts surveyed by Bloomberg.

“There’s not much more to go in terms of rate cuts which have helped drive the rally,” said Daniel Lozano, the head analyst at Serfinco brokerage in Bogota.

After this week’s meeting, policy makers will leave the rate unchanged in April and raise it to 3.75 percent by year-end, according to a survey of analysts published today by Citigroup Inc.

The peso depreciated 0.4 percent to 1,818.20 per U.S. dollar, its fifth straight day of losses, the longest losing streak since November.

Finance Minister Mauricio Cardenas told flower growers in Bogota today that Colombia must do everything possible to weaken the currency. Flower growers have lost 40,000 jobs in the past five years because of the peso’s gains, Augusto Solano, president of the Association of Colombian Flower Exporters, told reporters today.

‘More Audacious’

“Every day, the president calls me and says we need to be more audacious, more creative” to weaken the currency, Cardenas said, adding that the central bank may purchase $10 billion in the foreign-exchange market this year.

Colombia’s currency gained 9.7 percent in 2012 and touched a 17-month high on Jan. 2, prompting policy makers to increase dollar purchases in the foreign-exchange market to help exporters stay competitive.

Banco de la Republica will buy about $3.5 billion in the currency market from Jan. 1 through May 31 after purchasing more than $4.8 billion last year, central bank governor Jose Dario Uribe has said.

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