Colombia’s peso bonds fell, pushing yields up the most in three weeks, after the government said it would sell an additional 2 trillion pesos ($1.06 billion) of local debt to replace revenue from the scrapped sale of power company Isagen SA.
The yield on Colombia’s benchmark 11 percent bonds due July 2020 rose four basis points, or 0.04 percentage point, to 7.75 percent at 2:49 p.m. New York time, according to Colombia’s stock exchange. That’s its biggest increase since June 8. The bond’s price dropped 0.324 centavo to 122.129 centavos per peso.
“The additional amount is substantial,” said Camilo Perez, head analyst at Banco de Bogota SA, Colombia’s second- biggest bank.
President-elect Juan Manuel Santos, who is slated to take office Aug. 7, won’t sell Isagen, Finance Minister Oscar Ivan Zuluaga said today in a presentation to investors and reporters. The 2010 budget included 4 trillion pesos in revenue from the sale of the power company and five regional electric companies which may be delayed, he said.
To cover the gap, Colombia will also raise an additional $1 billion abroad, of which $500 million will be in overseas bonds and $500 million from multilateral lenders, Zuluaga said.
Under the new plan, Colombia this year will sell 27.52 trillion pesos worth of local bonds, known as TES, of which 15 trillion pesos will be through auctions. The nation also increased its international financing target to $3.25 billion, of which $1.3 billion will be through overseas debt sales.
Speculation Moody’s Investors Service will raise Colombia to investment grade is helping pare some of the losses in the TES market, according to Perez. The benchmark 2020 bond yields earlier rose to as high as 7.83 percent.
There is “potential” for Colombia to move to investment grade, Moody’s senior analyst Alessandra Alecci said in a June 30 interview. Moody’s rates Colombia’s foreign debt Ba1, or one level below investment grade. It has a stable outlook on the country.
Bets of a rating upgrade “has made people very positive,” said Perez.
Standard & Poor’s rates the nation’s foreign bonds at BBB-, the lowest level of investment grade, and the government at BB+, one step below. Colombia is rated BB+ by Fitch Ratings.
The peso advanced on speculation the increased international financing target will mean greater dollar flows into Colombia, according to Perez.
The currency climbed 0.5 percent to 1,888.60 per U.S. dollar from 1,898.60 yesterday. It has gained 0.6 percent so far this week. The peso has jumped 8.2 percent this year, the best performance among all currencies tracked by Bloomberg.
“The government will need to convert that into pesos sooner or later to finance its spending,” he said.