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Wednesday, April 3, 2013

Colombia Bond Yields Rise on View Rate Cuts Over; Peso Advances

Colombia’s peso bond yields rose for a third day on speculation the central bank’s rate-cutting cycle that began in July reached an end after an unexpected half- percentage-point cut last month.


Yields on peso bonds due 2024 climbed four basis points, or 0.04 percentage point, to 5.04 percent at 9:54 a.m. in Bogota, according to the central bank.

The price fell 0.438 centavo to 141.925 centavos per peso.

Finance Minister Mauricio Cardenas, who is also president of the central bank’s board, told reporters yesterday that the reduction in the overnight lending rate “should be sufficient” to speed economic growth toward 4.8 percent, the limit at which expansion wouldn’t spur excessive inflation.

“Cardenas’s tone has changed and that’s an indication for some there won’t be any more cuts,” said William Florez, a strategist at Helm Bank SA’s brokerage in Bogota.

Banco de la Republica lowered the target lending rate by 50 basis points to 3.25 percent on March 22, surprising all 32 analysts surveyed by Bloomberg. They have reduced the key rate 2 percentage points since the beginning of cuts in July.

Yields on the benchmark bonds have fallen 62 basis points this year, helped in part by the rate cuts. Florez predicts yields on medium- and long-term bonds will continue to fall amid liquidity in international markets and low inflation.

“The rally isn’t over,” said Florez, who forecasts the yield on the bond due in 2024 will fall to 4.7 percent this quarter.

The peso appreciated for a third consecutive session, advancing 0.1 percent to 1,820.44 per U.S. dollar. It has slumped 2.9 percent this year.

bloomberg.com

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