Colombia’s peso bonds rose, with yields tumbling the most in two weeks, as investors said concerns a drought may stoke inflation were overblown.
The yield on Colombia’s 11% benchmark bonds due in July 2020 dropped 14 basis points, the most since January 21, to 8.92% at 3:51 PM in New York, according to Colombia’s stock exchange. A basis point equals 0.01 percentage point. The bond’s price rose 1.03 centavos to 113.66 centavos per peso.
Yields surged 29 basis points in the past two days as a dry weather system that has damaged crops drove up food prices, prompting speculation the central bank will boost interest rates to slow inflation. Colombian cocoa growers said in a statement yesterday that output of the bean used to make chocolate will drop 20% in the first half of the year as dry weather and high temperatures damage plants.
“The market overreacted,” said Camilo Perez, head analyst at Banco de Bogota SA, the nation’s second-biggest bank after Bancolombia SA. “The main driver has been total nervousness concerning inflation and its impact on the central bank’s rate decision.”
Food prices climbed 2.15% last month, compared with a 0.21% decline in December and a 0.27% increase in January 2009, Colombia’s Agriculture Ministry said February 1.
Colombia’s consumer prices probably rose 1.98% in December from a year earlier, after climbing 2% the previous month, according to the median forecast of 19 economists in a Bloomberg survey. The inflation report is scheduled for release February 5.