Colombia’s peso bonds fell, pushing yields to their biggest weekly increase since September, as speculation China may raise interest rates hurt appetite for higher-yielding, emerging-market assets.
The yield on the nation’s benchmark 11 percent bonds due 2020 rose 36 basis points in the past week, its biggest increase since the period ended Sept. 10. The yield rose 12 basis points, or 0.12 percentage point, to 7.34 percent today at 1:17 p.m. New York time, according to Colombia’s stock exchange. The bond’s price plunged 0.965 centavo to 124.681 centavos per peso.
“Investors are selling riskier assets given the high uncertainty we’re seeing in global markets, first with the European debt crisis, and now with rates in China,” said Felipe Campos, head analyst at Bogota-based brokerage Alianza Valores.
China may increase interest rates within weeks after inflation accelerated to the fastest pace in 25 months in October, according to a Bloomberg survey. Irish bonds rose today, ending 13 days of declines, as Group of 20 officials said they’re working on ways to resolve the debt crisis.
Yields on Colombia’s benchmark 2020 bonds rose 16 basis points yesterday, the biggest increase on a closing basis since May. The securities triggered stop-loss levels when they touched 7.10 percent, pushing investors to sell the debt, according to Campos.
The Finance Ministry said this week its TES auctions are finished for the year after it issued 15 trillion pesos ($8 billion) of the peso securities.
Local investors may also be selling some of their holdings of the government peso bonds, known as TES, in order to purchase corporate bonds that are being offered in the local market, according to Campos.
Isagen SA, a Colombian state-controlled power producer, sold 400 billion pesos of inflation-linked securities in the domestic market yesterday. Ecopetrol SA may sell as much as 1 trillion pesos of bonds in the Colombian market during the week of Nov. 22 or Nov. 29, Laura Ramirez, a member of the sales group at Correval who is involved in managing the oil company’s debt sale, said in an interview earlier this week.
“Some investors are looking for an excuse to sell and bond offers like that of Isagen or Ecopetrol give them another reason to get out of TES,” said Campos.
The peso slid for a sixth day, weakening 0.5 percent to 1,867.33 per U.S. dollar, from 1,858.50 yesterday. It dropped 2.5 percent this week, its biggest decline since the period ended May 7. The drop pared the peso’s gain this year to 9.5 percent, the best performance among the six most-traded Latin American currencies tracked by Bloomberg.
(Andrea Jaramillo, Bloomberg)