Colombia launched a dollar bond Tuesday yielding 200 basis points over Treasurys, or 6.15%, that matures in January 2041.
The size is seen at around $1 billion, according to investors familiar with the offering. It will be the longest maturity sold by Colombian government.
The bookrunners are Goldman Sachs and Banc of America Securities.
The move is the latest among a flood of companies and governments from the developing world that have tapped international capital markets this year. These issuers are aiming to take advantage of lower risk premiums that are the result of the sharp rally in emerging market assets.
Colombian bonds gained about 25.6% year-to-date on JPMorgan’s Emerging Market Bond Index Global. The overall index was up about 28%.
“Demand for the bonds will be heavy,” Felipe Munoz, who manages a fund of dollar-denominated bonds with Colombian brokerage Corredores Asociados, said in remarks that echoed those of other money managers.
The government will use the proceeds to finance its 2010 budget, according to a preliminary prospectus sent to investors. The bonds will be listed on the Luxembourg Stock Exchange.
Currently, Colombia’s longest-dated note is the 16-year bond that matures in 2024.
“It is interesting in the sense that we haven’t had many long-duration new issuances in the sovereign world” recently, said Luis Costa, an emerging market strategist at Commerzbank.
As spreads narrow between emerging market bonds and U.S. Treasurys on higher demand for riskier assets, he added that “we are passing the optimal supply demand point.”
As a result, investors are likely more interested in longer duration maturities versus five-or seven-year notes, said Costa.
Dow Jones Newswires reported in August that the Colombian government was studying market conditions to sell $1 billion in international bonds to help meet its financing requirements for 2010.
“The idea is to issue $1 billion to pre-finance next year’s needs, but that will happen after September as markets are closed now because of vacations,” Viviana Lara, Colombia’s director of public credit, told Dow Jones Newswires at the time. “We are working on both fronts, in the international market and in the local market.”
The government plans to raise a total of $2.5 billion from international bonds for 2010 financing, Lara said, of which it has already secured $1 billion.
That would go toward next year’s need to raise $3.75 billion in foreign debt and 26.1 trillion Colombian pesos ($13 billion) from the sale of local peso-denominated bonds.