Colombia Yields Hold at One-Week Low as Inflation Forecasts Drop

Yields on Colombia’s peso bonds held at a one week low as investors lowered inflation forecasts, buoying demand for the fixed rate debt.

“Inflation expectations have been dropping in the last few weeks,” said Javier Dorich, senior analyst in Bogotá at Banco de Bogotá SA, the nation’s second-biggest bank. “

Recent data points to growth that isn’t as strong. 

That is leading investors not only to cut inflation bets but also to see rates remaining stable for the rest of the year.”

The yield on Colombia’s 10 percent peso denominated debt due in july 2.024 was little changed at 7.10 percent, matching the lowest level on a closing basis since April 20 that was touched yesterday.

Annual inflation will end the year at 3.3 percent, according to the median estimate in a Citigroup Inc. survey of 27 economists published April 25. 

That’s down from 3.5 percent in the previous survey. Annual inflation unexpectedly slowed to 3.40 percent in March and is within the central bank’s 2 percent to 4 percent target.

The central bank will leave the overnight lending rate at 5.25 percent on April 30. 

Banco de la República has raised the benchmark rate nine times since February 2.011, bringing it up from a record low 3 percent.

While an extra leap year day this ebruary helped retail sales rise 9.4 percent from a year earlier and industrial output increase 4.5 percent, activity in “industry isn’t improving and continues to moderate in retail,” Banco de Bogotá said in an April 23 report.

Colombia’s peso fell 0.1 percent to 1,764.40 per dollar, from 1,762.07 yesterday. 

The currency gained 0.4 percent this week and is up 9.9 percent this year in the second-best performance after the Hungarian forint among all currencies.