Traders bet on Colombian interest rates to hit the floor

Traders are increasing bets that Colombia will reduce interest rates this month to the lowest in Latin America, after some policy makers voted for bigger cuts in December and the inflation rate fell to a two-year low.

The yield on three-month interest-rate swaps has fallen 20 basis points, or 0.20 percentage point, to 3.9 percent, since the bank last cut borrowing costs on December 21.

That implies about an 80 percent chance of another quarter-point reduction to 4 percent at the central bank’s January board meeting, according to Catalina Silva, a fixed-income analyst at Cia. De Profesionales de Bolsa in Bogota.

Source: Bloomberg