Colombia’s $2.2 Billion Bond Auction Add-On Drives Up Yields

Colombia’s bond yields jumped to a two-month high after the government said it will issue as much 4 trillion pesos ($2.2 billion) of additional debt to drain cash created by foreign-exchange market intervention.

The yield on the 9.25 percent peso-denominated debt due in May 2014 rose nine basis points, or 0.09 percentage point, to 5.05 percent at the close in Bogota, the highest since Aug. 29, according to the central bank. The price plunged 0.146 centavo to 105.851 centavos per peso.

The central bank and government stepped up dollar purchases this year to ease a rally in the local currency that policy makers say is threatening jobs in agriculture and industry. The plan to issue additional debt also comes amid reduced trading volumes following the collapse this month of Interbolsa SA’s brokerage, the nation’s biggest.

“There’s a lot of uncertainty in the market given what happened with Interbolsa,” said Felipe Campos, the head analyst at Alianza Valores brokerage in Bogota. “The lack of confidence is predominant in the market, and these auctions come to compete for the little volume there is.”

Finance Minister Mauricio Cardenas said Nov. 7 that regulators will liquidate Interbolsa’s brokerage after it failed to meet a loan payment. The Colcap stock index has dropped 4.2 percent this month after Interbolsa said Nov. 1 it was facing a funding squeeze.

There were no trades yesterday of the country’s benchmark peso bonds due in July 2024 on the central bank’s platform known as SEN. The yield on those securities increased six basis points to 6.29 percent today.

Bond Auctions

The Finance Ministry said in a statement that it will auction peso bonds, known as TES, due in January 2014, November 2014 and November 2015 in weekly debt sales starting tomorrow. The central bank asked the government to issue the securities to offset the increase in pesos fueled by the country’s purchases of dollars aimed at weakening the currency, according to the statement.

The peso declined 0.1 percent to 1,820.05 per U.S. dollar, paring its rally in the past year to 5.2 percent, still the best performance after the Singapore dollar among emerging-market currencies tracked by Bloomberg.

Banco de la Republica said Sept. 28 it was extending plans for dollar purchases and will buy a minimum of $3 billion between Oct. 1 and March 29 in amounts of at least $20 million per day.

Cardenas has also said the government is buying dollars for its petroleum stability fund, in which some of the country’s oil royalties are invested. The fund will end the year with $1 billion in dollar holdings, compared with $500 million at the end of September, Cardenas said Sept. 28.

To contact the reporter on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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