Colombia Peso Bond Yields Fall Near Record Low on Rate Cut Bets

Yields on Colombia’s peso bonds fell near a record low amid speculation the central bank will lower interest rates this year to buoy growth in the Andean nation.

The yield on Colombia’s 10 percent peso-denominated debt due in July 2.024 fell one basis point, or 0.01 percentage point, to 6.82 percent at 10:35 a.m. in Bogotá, according to the central bank. 

It fell to 6.8 percent on July 16, the lowest level on a closing basis since the securities were first issued in 2.009. 

The bond’s price rose 0.091 centavo today to 125.537 centavos per peso.

Central bank chief Jose Dario Uribe reiterated yesterday the bank will probably lower and narrow the range of its forecast for 2.012 Colombian growth from the current projection of 4 percent to 6 percent. 

The upper limit of the current range is no longer “reasonable,” he told reporters.

Speculation there will be a rate cut mounted after minutes of the central bank’s most recent meeting, released July 13, showed more than one member of the seven-member board voted for a quarter-point interest rate reduction last month and wanted the bank to begin a “relaxation phase.” 

Banco de la República held the overnight lending rate at 5.25 percent for a fourth straight month on June 29 as growth cooled and prices of the country’s commodity exports dropped. 

The next monetary policy meeting is scheduled for July 27.

Colombia’s Finance Ministry will issue new inflation-linked peso bonds due 2.021 in an auction today. 

The ministry will offer 400 billion pesos ($224 million) of the 3.5 percent 10-year inflation-linked securities, known as TES UVR, according to a statement on the central bank’s website.

The peso erased an earlier decline, gaining 0.1 percent to 1,778.8 per dollar. 

It’s up 9 percent this year, the best performance among all currencies.