Colombian Peso Bond Yields Rise to 7-Week High on CPI Concern

Colombia’s peso bonds fell, pushing yields on benchmark securities to a seven-week high, on concern heavier than-average rain will push food prices higher and stoke inflation.

The yield on the 10 percent bonds due in July 2024 rose four basis points, or 0.04 percentage point, to 7.7 percent at 9:57 a.m. 

Bogotá time, according to the central bank. 

That’s its highest level since Oct. 4. The bond’s price fell 0.36 centavo to 118.111 centavos per peso.

“People are concerned that this bad weather not only will push food prices higher but will also lead to increased transportation costs,” said David Moreno, a fixed-income analyst at Bogotá based brokerage Cia. de Profesionales de Bolsa SA.

Colombia’s weather agency said earlier this week that rains will persist because of the La Niña weather pattern which triggers above average rainfall. 

Floods last year and at the beginning of this year damaged crops and choked off farmers’ supply routes, pushing food prices higher.

Agriculture Minister Juan Camilo Restrepo said, according to a statement today on the ministry’s website, that while rains haven’t caused a food shortage in the South American country, damaged roadways used by farmers and blocked highways due to mudslides may lead to scarcity of some farm goods in different parts of the country.

Consumer prices rose 0.19 percent last month, driven by higher food and health prices, according to a Nov. 5 government report.

Annual inflation in Colombia quickened to 4.02 percent in October, above the central bank’s 2 percent to 4 percent target for this year. 

It was the first time since 2009 that inflation exceeded the central bank’s target. 

It’s “highly probable” that inflation will end this year at 3.5 percent, central bank chief Jose Dario Uribe said Nov. 11.

Colombia’s central bank will raise the overnight lending rate a quarter percentage point to 4.75 percent tomorrow, according to 17 of 33 economists. 

Sixteen analysts expect policy makers to leave the rate unchanged.

Colombia’s peso fell 0.4 percent to 1,942.75 per U.S. dollar in the next-day market, according to the stock exchange’s foreign exchange electronic transactions system, known as SET- FX.

Because of the Thanksgiving holiday in the U.S., Colombia’s currency trades in the so called next day market, in which payment and delivery are made the following trading day.