Yields on Colombian government peso-denominated treasury bonds, or TES, rose at Wednesday’s auction as investors are less attracted by government debt since they expect inflation to pick up.
The Colombian Treasury sold 400 billion Colombian pesos ($203 million) worth of TES with total demand almost three times as high, according to the Finance Ministry.
“People are concerned about inflation rising in the coming months,” said Daniel Lozano, a market analyst with local brokerage Profesionales de Bolsa. “Higher inflation will lead the Central Bank to raise interest rates eventually.”
According to the Colombian Central Bank’s monthly survey, analysts expect the inflation rate to end this year at an average of 3.75%, up from an inflation rate of 2% in 2009.
The bank has cut rates by 6.5 percentage points since December 2008, to 3.50% and some analysts expect the bank will raise rates in the second half of this year as inflation picks up.
During Wednesday’s auction, the yield on the TES maturing in 2012 was 7.100%, up from 6.999% on the last auction carried out on Jan. 27.
The bond maturing in 2016 ended at 8.548%, up from 8.20% two weeks ago.
The yield on the bond maturing in 2024 rose to 9.015%, from 8.742% on Jan. 27.
(Inti Landauro, Dow Jones)