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Local Rates Underperform As Inflation Concerns Linger

COLOMBIA
  • Noticing a meaningful underperformance in Colombian IBR swap rates today, with yields up 15bp or more across much of the curve. Pressure on core UST yields in Monday’s session is likely playing a part, along with the small upside surprises in Colombian headline and core CPI inflation on Friday. Though inflation remains on a downtrend, the headline and core rates (at 7.36% y/y and 8.76%, respectively) remain well above peers in the region, limiting room for aggressive rate cuts ahead.
  • Latest headlines about water rationing in the capital as reservoir levels have fallen to a critical threshold may also be adding to inflation concerns and contributing to today’s underperformance.
  • With inflation pressures remaining high, doubts persist over whether BanRep will be able to accelerate the easing pace beyond 50bp at its next MPC meeting on April 30. While Finance Minister Bonilla will doubtless argue for a larger rate cut, especially given recent FX strength, Governor Villar has continued to strike a more cautious tone, noting inflation and inflation expectations that remain well above target.
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