Colombian Peso Bond Yields Hold at 7-Week High on Rate Hike Bets

Yields on Colombia’s peso bonds held at a seven-week high on speculation the central bank will raise interest rates at a meeting today.

The yield on the 10 percent bonds due in July 2024 were little changed at 7.67 percent at 10:12 a.m. Bogota time, according to the stock exchange. 

That’s its highest level since Oct. 4. The bond’s price fell 0.003 centavo to 118.376 centavos per peso.

The central bank will increase the overnight rate by a quarter point to 4.75 percent, according to 18 of 35 economists. 

Seventeen analysts expect the bank to leave the rate unchanged. Banco de la Republica will probably announce its decision after 1 p.m. New York time. 

That would make Colombia the only country in Latin American to raise rates since Brazil started cutting borrowing costs in August as countries shift to safeguarding their economies against a global slowdown.

“The bond market is pricing in a hike,” said Carlos Torres, head analyst at Asesores en Valores SA brokerage in Bogota. 

Policy makers “face a very difficult decision though and it shows on how divided analyst calls are. The question is if the central bank will focus on the risk of contagion from abroad or on the lending boom and rising inflation expectations which point to a hike.”

Concern the European debt crisis is worsening pushed the Colombian peso to a seven-week low.

The peso slid 0.6 percent to 1,944.24 per U.S. dollar from 1,932.47 yesterday. 

Earlier it touched 1,950.02, its weakest level since Oct. 10.