(Bloomberg) Colombian peso bonds gained after Moody’s Investors Service lifted the country’s debt rating outlook to positive on expectations that shrinking budget deficits will drive down debt levels.

Yields on benchmark government peso bonds due in 2024 dropped seven basis points, or 0.07 percentage point, to 6.82 percent, the biggest decline since June 27. Moody’s, which raised the outlook from stable, rates Colombia Baa3, the lowest investment-grade level. In signaling an increase, Moody’s is following Standard & Poor’s, which raised the Andean country’s rating to BBB, or two levels above junk, in April.

Colombia’s budget deficit “has trended lower in recent years,” Moody’s said in the statement. “Expectations of continued improvements in the main debt metrics will support further upgrades.”

Moody’s forecasts Colombia’s debt will fall to the equivalent of 32 percent of gross domestic product this year from 34.5 percent in 2009. The country earned an investment-grade rating in 2011 for the first time in a decade as improved security bolstered economic growth and attracted record foreign investment. Congress passed legislation, known as the fiscal rule, that year allowing the government to save part of the windfall revenue it receives from rising commodity prices.

“We expect that the government will continue to comply with the targets set by its fiscal rule,” Moody’s said in the statement. Colombia has set a central government deficit target of 1 percent of GDP in 2022, down from 2.4 percent in 2012.

Fitch Ratings also has a positive outlook on its Colombia rating of BBB-, the lowest investment-grade level.

Yields on the government’s dollar bonds due 2021 rose 20 basis points to 3.95 percent today. The peso, which closed before Moody’s announcement, gained 0.1 percent to 1,925.83 per U.S. dollar.

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