Colombia will exceed last year’s record in private bond issues in 2010 as low interest rates spur companies to sell debt amid rising investor demand, said Juan Pablo Cordoba, president of the country’s main stock exchange.
Colombian firms this year are expected to issue more than the COP13.4 trillion ($7.07 billion) of bonds sold last year, Cordoba said at an investor conference in Bogota.
Demand for corporate debt is growing as pension funds reach regulatory limits on stock holdings and a widening budget gap weakens the appetite for government securities, said Camilo Forero, head analyst at Bogota brokerage Cia. de Profesionales de Bolsa. That, combined with record-low borrowing costs, may push firms to sell as much as COP15 trillion of bonds this year, Forero said.
“It’s an exceptional moment for companies to take on long-term debt,” Forero said. “There’s enormous liquidity, not just in Colombia, but in the world in general.”
The central bank last year slashed its benchmark lending rate to 3.5% to help lift Latin America’s fifth-biggest economy from its first recession in a decade. The government plans to cut spending in a bid to meet its 2010 budget deficit target of 3.7% of gross domestic product, up from 2.7% posted last year.
After the benchmark IGBC index rallied 53% last year, pension funds are reaching the government-set limit of 40% of assets in stocks, according to Forero. As funds invest a total of COP800 billion each month, that will ensure strong demand for corporate-bond sales, Forero said.
Bolsa de Valores de Colombia SA, as the country’s bourse is known, will see revenue gain as the jump in bond issues leads to increased trading, Forero said. The exchange’s private-debt trading volume last year rose 48% to COP115 trillion.
(Alexander Cuadros, Bloomberg)