Colombia Bonds Yields Rise to 10-Week High on Greek Debt Concern

Colombia’s peso bonds fell, sending yields to a 10-week high, as concern Greece will default and deepen Europe’s debt crisis reduced demand for higher yielding emerging market assets.

The yield on Colombia’s benchmark 10 percent bonds due in July 2.024 rose 15 basis points, or 0.15 percentage point, to 7.74 percent at 11 a.m. New York time. 

The yield is the highest since July 25. 

The bond’s price fell 1.317 centavo to 117.944 centavos per peso.

Greece said it passed a budget backed by its international creditors, including larger deficits than previously forecast, as the country moves closer to securing an 8 billion-euro ($10.6 billion) aid payout needed to avoid default. 

European finance ministers gathered today to consider enhancements to the region’s rescue fund and plan to meet again on Oct. 13 to decide whether Greece’s austerity push is enough to win the sixth bailout payment.

“In the last few weeks, we’ve seen aggressive profit- taking in emerging markets as investors acknowledge these countries will see their economies hurt by the international environment,” said Felipe Campos, head analyst at Alianza Valores SA brokerage in Bogota. 

“This view will probably continue to lead to declines in emerging markets.”

The peso fell 0.7 percent to 1,946.20 per U.S. dollar, the lowest since Dec. 29, from 1,931.98 on Sept. 30.

Dollar Auctions

In a bid to ease the peso’s “extreme volatility,” Colombia’s central bank said Sept. 30 that it will auction $200 million in the when the exchange rate moves more than 2 percent above or below its 10-day moving average. 

The 10 day moving average will begin to apply Oct. 14, the bank said in a statement today.

Banco de la Republica also said Sept. 30 it ended a program of purchasing a minimum of $20 million daily in the currency market after a rout in global markets wiped out the peso’s gains this year. 

The currency has dropped 2 percent in 2.011.

The central bank’s announcement is helping ease the peso’s slide today, according to Campos.

“As the auctions help ease volatility, investors bet the peso won’t fall as much,” Campos said. 

“Its more psychological than anything else. 

What we saw in 2.008 is that when the market enters panic mode, we’ll still see episodes of a lot of volatility.”