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Colombia's Bond Yields Fall to a Four-Year Low on Investment Grade Bets
Colombia’s peso bonds rose, pushing yields to a four-year low, on speculation the South American nation will be raised to investment grade, luring foreign investors to the country’s financial assets.
The yield on Colombia’s benchmark 11 percent bonds due July 2020 fell seven basis points, or 0.07 percentage point, to 7.42 percent at 2:43 p.m. New York time, according to Colombia’s stock exchange. That’s the lowest level since March 2006. The bond’s price rose 0.514 centavo to 124.629 centavos per peso.
Standard & Poor’s Ratings Services, which rates Colombia BB+, or one level below investment grade, on July 7 raised its outlook on the country’s credit rating to positive from stable. The move follows comments from Alessandra Alecci, an analyst with Moody’s Investors Service, who said in a June 30 interview that the agency is “optimistic” on Colombia and that there is “potential” for the country to move toward investment grade. Moody’s rates Colombia’s foreign debt Ba1, or one level below investment grade. It has a stable outlook on the rating.
“There has been a change in risk perception towards Colombia,” said Felipe Campos, head analyst at Bogota-based brokerage Alianza Valores. “Expectations of investment grade have created a snowball effect as people want to invest in Colombia, driving the peso, bonds and stocks higher.”
Yields on the 2020 peso bonds have fallen 93 basis points since May 18 while the IGBC Index and Colcap Index rose to record levels this week.
‘Asks for Actions’
The peso was little changed at 1,843.5 per U.S. dollar, from 1,843.25 yesterday. The peso rose 11 percent in 2010, the best performance among world currencies tracked by Bloomberg. The currency strengthened 1.3 percent this week and 3.1 percent in July.
The Association of Colombian Flower Exporters in a statement today titled “Flower Growers Ask Where Is Banco de la Republica” asked the central bank to intervene in the currency market as the strengthening peso cuts exporter revenue.
“The flower industry asks for actions to avoid the loss of hundreds of jobs,” Augusto Solano, president of the association known as Asocolflores, was cited as saying in the statement.
The flower industry overall lost 14,000 jobs in the past five years because of the peso rally and stands to lose another 12,000 in companies that have filed for bankruptcy protection, Asocolflores said in April. The industry employs more than 225,000 people, according to the statement.
Central bank chief Jose Dario Uribe told reporters after the bank’s July 23 monetary policy meeting that Banco de la Republica “has never ruled out intervening in the market again.” The bank purchased $20 million a day between March 3 and June 30 to curb a rally policy makers said left the peso “misaligned.”
To contact the reporter on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net
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