Colombia Bond Yields Rise to Highest Since November; Peso Slides

Colombia’s bond yields rose to the highest since November as mounting speculation that the Federal Reserve will taper stimulus and faster-than-forecast inflation in the Andean country squelched demand for the securities.

The yield on benchmark peso bonds due 2024 rose 16 basis points, or 0.16 percentage point, to 6.17 percent at 2:32 p.m. in Bogota, the highest since Nov. 19. The price fell 1.48 centavos to 130.210 centavos per peso. Yields have jumped 1.14 percentage point in the past month.

Bonds and currencies have tumbled around the world on speculation a pickup in the U.S. economy will prompt the Fed to scale back its asset-purchase program. Ten-year U.S. Treasury yields have jumped 30 basis points in the past month to 2.07 percent. Colombia’s consumer prices rose 2 percent in the 12 months through May, the government said yesterday, above the median forecast in a Bloomberg survey for a 1.96 percent increase.

“The big driver is speculation over Fed stimulus which is leading to this global sell off,” said Camilo Perez, head analyst at Banco de Bogota SA, the nation’s second-biggest bank. “Inflation is providing an additional argument to sell the bonds. It’s hard to find buyers in the market, everyone is selling.”

Colombia’s peso dropped 0.3 percent to 1,904.58 per U.S. dollar, the weakest since January 2012. The currency has plunged 7.2 percent this year.

The central bank last week extended its dollar-purchase program, announcing it will buy at least $2.5 billion in the currency market between June and September.

Colombia needs to boost international reserves as the economy grows, central bank Governor Jose Dario Uribe said in an interview today. He said in a presentation yesterday that a weaker peso would be good for Colombia.

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