Colombia’s peso bonds rose, pushing yields to a one-week low, and the peso gained after the government said it would reduce spending this year to contain a widening budget deficit.
Colombia will reduce this year’s budget by COP5.9 trillion (US$3.01 billion) to meet the 2010 consolidated budget deficit target of 3.7% of gross domestic product, Finance Minister Oscar Ivan Zuluaga said yesterday. That compares with an estimated budget deficit of 2.7% of GDP last year.
“The market had been worried the government would need to issue more local debt to cover the budget gap,” said Felipe Campos, an analyst at Bogota-based brokerage firm Alianza Valores. “News the government will cut spending instead is a relief.”
The yield on the country’s 11% benchmark bonds due in July 2020 fell eight basis points, or 0.08 percentage point, to 8.57% at 12:52 p.m. New York time, according to Colombia’s stock exchange. It earlier touched 8.54% , its lowest level since January 12.
The peso rose 0.6% to 1,957.52 per dollar from 1,969.85 yesterday.
Zuluaga also said yesterday the government will sell COP26 trillion of its peso bonds to finance this year’s budget, COP13 trillion of which will be auctioned.