Colombia Peso Bond Yields Fall to Record Low on Rate-Cut Outlook

Colombia’s peso bonds rose, pushing yields to a record low, amid speculation the central bank will lower borrowing costs as early as this month to help boost growth as the economy slows.

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 6.51 percent at 11:53 a.m. in Bogotá, according to the central bank. 

That’s the lowest level on a closing basis since the securities were first issued in 2.009.

Policy makers will cut the overnight lending rate a quarter percentage point to 4.5 percent at the Sept. 28 meeting and then leave it at that level through the remainder of the year, according to the most frequent forecast in a central bank survey of analysts published yesterday. 

Banco de la República lowered borrowing costs at each of its past two meetings as the weakening global economy damped export demand.

Investors will be watching for reports next week on industrial output, retail sales and second-quarter growth to “get a better sense of when that rate cut may come,” he said.

Colombia’s inflation will end this year at 3 percent, according to the median estimate in the central bank survey, up from the previous month’s forecast of 2.95 percent. 

The central bank targets inflation between 2 percent and 4 percent.

The peso rose after the Federal Reserve said it will buy mortgage securities and keep interest rates “exceptionally low” through the middle of 2.015 to bolster the world’s biggest economy.

The local currency climbed 0.1 percent to 1,800.20 per U.S. dollar. It has jumped 7.7 percent this year.