Colombia’s peso-denominated bonds
dropped the most in two years amid concern a global financial
crisis will deepen.
“The world is in risk re-pricing mode,” said Alberto
Bernal, head of emerging market research with Bulltick Capital
Markets in Miami. “Although Latin America is in much better
shape to weather an international storm, that doesn’t mean it’s
The yield on Colombia’s benchmark 11 percent bonds due in
July 2020 rose 51 basis points, or 0.51 percentage point, to
12.5 percent at 11:44 a.m. New York time, according to
Colombia’s stock exchange. The bond’s price plunged 2.93
centavos to 90.895 centavos per peso, its biggest drop since
June 28, 2006.
The peso dropped 1.6 percent to 2,200 per dollar, from
2,166.1 yesterday, according to the Colombian foreign-exchange
electronic transactions system, known as SET-FX. The currency
touched 2,205, its weakest since March 2007.
The peso has slipped 6.8 percent this week following the
record bankruptcy filing by Lehman Brothers Holdings Inc. and the
government takeover of American International Group Inc., the
largest U.S. insurer.
The world’s biggest central banks, including the
U.S. Federal Reserve and the European Central Bank, agreed to
pump as much as $247 billion into the financial system in a bid
to stem the worst financial crisis since the 1920s.
Colombia’s central bank has been buying $20 million a day in
the currency market as part of a plan announced in June to
accumulate international reserves. The bank will likely scrap the
plan if the peso weakens to about 2,300 or 2,400 per dollar, said
Juan Pablo Barney, a foreign-exchange trader at Banco Bilbao
Vizcaya’s Colombia unit in Bogota.
‘It’s a good thing to accumulate international reserves,
especially in times of uneasiness, but once the weakening peso
creates inflationary problems, the bank will have to change its
plans,” Barney said. (Bloomberg)