The government of Colombia on Wednesday issued $263 million in domestic market bonds.
“As part of its program of public debt issuances, [Colombia] issued $263 million in peso-denominated TES bonds at 5, 10 and 15 years,” read a statement from the Ministry of Finance.
Colombia’s local bond issuances are part of a move to raise money for financing short term projects. The offer goes hand in hand with an offering of $200 million in US-denominated bonds on the international market.
The Finance Ministry declared that the local issuance was more than 3 times oversubscribed, signaling high demand for Colombia’s government paper, which came onto the market trading at coupon rates of 6.09%, 6.661% and 7.269% for the 5, 10 and 15 year bonds, respectively.
Short term funding
Income derived from the bond sale is likely destined for short term financing on projects in 2014 and 2015, according to Ultrabursatiles, a Bogota-based brokerage.
VP of Research Alejandro Reyes told Colombia Reports, “I think this government sees a panorama in the next couple years that’s going to be squeezed of funding. So it wants to pre-finance projects now. And it will likely use the debt to pay off other bonds that are coming mature as well.”
The government is unlikely thinking of the move as a way to keep its currency competitive with this issuance, according to Reyes.
Fitch ratings agency pins Colombia’s sovereign debt rating at BBB-/Positive for foreign currency-denominated debt and BBB/Positive for peso-denominated debt. Both ratings give Colombia the lowest investment grade status on the Fitch scale.
Colombia is enjoying a bond bonanza. With a 4% coupon on the government issuance of $200 million in dollar-denominated debt on the international market, Colombia’s bond issuances are beating out US Treasuries, making its credit attractive to investors who are scouring for better yields.
Colombia’s state-directed oil and gas company Ecopetrol issued $2.5 billion in dollar-denominated debt on the international market earlier this month. Foreign investors in the credit market found its yields at more than 100 basis points above the US Treasury benchmark yields to be an attractive option.
“Ecopetrol’s credit profile speaks for itself,” said a credit analyst at a Hong Kong hedge fund. “Negligible debt levels and margins of 50% for its business…. The company priced its bonds at a very attractive level for investors…”
The analyst said the Ecopetrol offer was significantly oversubscribed as well.
Colombia’s sovereign credit rating on dollar denominated debt, a mark of its creditworthiness and a strong indicator of guarantee in the eyes of foreign investors, is keeping pace with the two largest economies in Latin America.
Brazil (BBB) and Mexico (BBB), the two biggest economic players in Latin America, both maintain investment grade ratings according to Standard and Poor’s ranking.
Interview with VP Research Alejandro Reyes (Ultrabursatiles)
MinHacienda realiza exitosa colocación de títulos TES por $500 mil millones (Ministry of Finance)
Fitch rates Colombia’s 2024 Global bonds ‘BBB-‘ (Fitch Ratings via Reuters)