Colombia’s peso bonds fell, pushing yields up the most since May, as concern some European governments may struggle to pay their debts led investors to seek refuge in the U.S. dollar.
The yield on the nation’s benchmark 11 percent bonds due 2020 rose 16 basis points, or 0.16 percentage point, to 7.22 percent at 3:08 p.m. New York time, according to Colombia’s stock exchange. That’s its biggest increase on a closing basis since May 6. The bond’s price plunged 1.291 centavos to 125.646 centavos per peso.
Irish government bonds tumbled for a 13th day on mounting concern the nation will be forced to restructure its finances while Spanish bonds also headed for a 13th day of declines on signs the economy stalled. French Finance Minister Christine Lagarde said yesterday that investors must share in the cost of safeguarding sovereign debt, backing calls from Germany.
“Concern about Europe is making the market nervous,” said Karen Alfonso, an analyst at Bogota-based brokerage Afin SA.
Local investors may also be selling some of their holdings of the government peso bonds, known as TES, in order to purchase corporate bonds that are being offered in the local market, said Daniel Velandia, head analyst at Bogota-based brokerage Correval SA.
Isagen SA, a Colombian state-controlled power producer, sold 400 billion pesos ($215.2 million) of inflation-linked securities in the domestic market today. Investor demand for the securities totaled 1.3 trillion pesos, more than three times the amount offered. (Andrea Jaramillo / Bloomberg)
Ecopetrol SA may sell as much as 1 trillion pesos of bonds in the Colombian market during the week of Nov. 22 or Nov. 29, Laura Ramirez, a member of the sales group at Correval who is involved in managing the oil company’s debt sale, said in an interview earlier this week.
“Given all the nervousness, it’s a good excuse to take profit on TES and buy corporate bonds that may offer better returns,” said Velandia.
Increased risk aversion also led to a drop in the Colombian peso, according to Alfonso.
The peso dropped for a fifth day, declining 0.3 percent to 1,858.50 per U.S. dollar, from 1,853.73 yesterday. The decline pared the peso’s gain this year to 10 percent, the best performance among the six most-traded Latin American currencies tracked by Bloomberg.