Colombia Bonds Surge With Peso as JPMorgan Plans Weighting Boost

Colombia’s benchmark peso bonds climbed the most since July and the peso rallied after JPMorgan Chase & Co. said it planned to raise the Andean country’s weighting on two of its indexes starting May 30.

The price of peso bonds, or TES, maturing in 2024 climbed 1.955 centavos to 122.484 centavos per peso at the close in Bogota trading, according to data from the central bank. Yields plunged 24 basis points, or 0.24 percentage point, to 6.88 percent, the lowest level since Jan. 22. The peso gained 1 percent to 2,009.60 per U.S. dollar.

Colombia’s weighting on the GBI-EM Global Diversified index may rise to 8.05 percent from 3.24 percent and that on the GBI-EM Global index may increase to 5.6 percent from 1.81 percent, JPMorgan said. Turkey, Russia, Thailand, Indonesia and Hungary may have a reduced weighting, JPMorgan said.

“Investors are anticipating more inflows into the TES market,” Juan David Ballen, an analyst at Alianza Valores brokerage, said in a phone interview in Bogota.

Colombia’s TES bonds will probably rally further, according to Kenneth Lam, a Latin America currency and rates strategist at Citigroup in New York.

“The weight increase should generate very significant inflows into TES bonds,” Lam wrote in a report.

The weightings will be increased “as a result of improved transparency and accessibility for international investors in the local TES market,” JPMorgan said in its report.

Five securities including TES due in 2016, 2018, 2022, 2024 and 2028 will be included in a “phased approach” starting May 30 and ending Sept. 30, JPMorgan said.

The impact on the peso “could be more muted compared to bonds, since a portion of the inflow is likely to be hedged,” Citi’s Lam wrote.

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