The Colombian Ministry of Finance announced the release of $2 billion in global bonds to international markets, news site LA F.m reported Tuesday.
The ten-year bonds will mature in July 2021. The sovereign debt sale is expected to yield 130 basis points, or 1.3%, which, according to the newspaper Bloomberg, is greater than the yield on similar U.S. Treasury bonds.
Nearly 300 investors from the United States, Europe, and Latin America are expected to purchase the bonds, collectively bidding over $7.3 billion for the dollar securities.
The sale was managed by Bank of America, Barcalys Plc, and Citigroup.
According to the news site Dinero, the Colombian government has made the decision to globally issue bonds in the currency of the United States, instead of the Colombian peso, to take advantage of an especially low interest rate of 4.375%. The rate is the lowest ever achieved by Colombia in its history in global markets.
Moreover, the issuance of foreign currency bonds is consistent with Colombian President Juan Manuel Santos’ policy to avoid further appreciation of the peso.
Colombia’s rapidly growing economy, coupled with its recent credit rating boost, render it a prime target for foreign investors. Yet foreign investment in the local currency could drive up the value of the Colombian peso, which is already 9% stronger against the dollar than it was a year ago.
The Ministry of Finance instead opted to raise capital in U.S. dollars.
The capital will be used to pay off Colombian debts abroad. The minister of finance explained that the dollars will not be brought into the country to prevent the collapse of the exchange rate.