Colombia may sell peso bonds with
maturities as long as 20 years, the longest-term securities in
the domestic market, as slowing inflation and falling interest
rates fuel demand, Bloomberg reported Friday.
The government is considering selling debt due in 2024 or
2029 by June as interest from pension funds and insurers for
longer maturities picks up, said William Ortiz Linares, head of
local debt sales at the ministry. Colombia has never sold a
fixed-rate bond in the local market with a maturity longer than
15 years. The ministry hasn’t decided whether the new bond would
have a fixed interest rate or be linked to inflation, he said.
“The conditions are being created” for the sale, Ortiz
Linares, 46, said in a telephone interview from Bogota. “There’s
a lot of liquidity and investors have indicated they are
interested in longer-term risk.”
Banco de la Republica was the first central bank in Latin
America to lower its benchmark lending rate amid the global
credit crisis, anticipating the worldwide recession would curb
growth and push down inflation in Colombia. Inflation will slow
to 5 percent this year from 7.7 percent in 2009, the government
forecast this week. The ministry cut its growth forecast to 3
percent from 5 percent for the year.
Central bankers trimmed the benchmark rate a half percentage
point to 9.5 percent on Dec. 19, the first reduction in three
years. Policy makers will cut the rate again at a Jan. 30
meeting, to 9 percent, according to the median forecast of 12
economists surveyed by Bloomberg News.
Colombian peso bond prices have rebounded after tumbling to
the lowest in at least three years when the global crisis
deepened in October. The yield on the 11 percent bonds due in
2020 has declined 3.9 percentage points since Oct. 24 to 9.88
percent and touched an 18-month low of 9.77 percent yesterday,
according to Colombia’s Stock Exchange. The price climbed to
107.298 centavos per peso from 83.288 in October, the lowest
since the securities were issued in July 2005.
“Slowing inflation, Banco de la Republica cutting rates and
ample liquidity is making peso bonds very attractive,” said
Camilo Perez, head economist at Banco de Bogota SA, Colombia’
second-biggest bank. “Under those conditions investors, want to
invest, especially in long-term debt.”
The ministry is adjusting its menu of short-term bonds in
auctions scheduled over the next month, said Ortiz Linares, who
has run the local debt sale department for the past four years.
In the next auction of fixed-rate peso bonds, slated for
Jan. 28, the government will issue new securities due in August
2012 and will halt sales of notes due in May 2011, according to
Ortiz Linares. The ministry will also stop selling its November
2013 bonds after this month and will replace them with notes due
in May 2014, he said. Colombia may issue a new 10-year benchmark
bond in the first half of the year to replace the October 2018
bonds it’s currently offering, he said.
“We’re seeing if it’s better for us to issue a 10-year bond
and a longer benchmark or just go with the longer one,” said