Colombia May Cut 2012 Local Bond Auction Plans, Arce Says

Colombia may pare next year’s local bond auction plan as quickening economic growth bolsters tax revenue and reduces the government’s financing needs, said Public Credit Director German Arce.

“If there are any surprises, these will be positive in fiscal terms,” Arce said in an interview today in his Bogota office. “We’ve had a good year in terms of tax revenue and the economy is growing at a good pace.”

The government will announce new figures for its 2012 financing program in December, Arce said. A reduction in the plan would be the second this year. Finance Minister Juan Carlos Echeverry trimmed last month the planned offerings to 18.6 trillion pesos ($9.7 billion) from an initial 20 trillion pesos after a debt swap lowered financing needs.

Colombia’s central bank raised its 2011 economic growth forecast in July to as high as 6.5 percent even as Europe’s debt crisis prompted banks from UBS AG to Citigroup Inc. to cut their forecasts for the global expansion. The surge in growth likely will push tax revenue this year to 81.2 trillion pesos, up from a previously expected 75.3 trillion pesos, President Juan Manuel Santos said on Oct. 7.

Colombia has no plans to begin meeting its 2012 financing needs by auctioning more local bonds, known as TES, after this year’s issuance program ends this month, according to Arce.

Yield Forecast

The yield on Colombia’s benchmark 10 percent bonds due in July 2024 rose three basis points, or 0.03 percentage point, today to 7.49 percent. That’s up from a record low of 7.19 percent reached Sept. 8.

The government’s “good fiscal accounts” is also helping drive down yields, said Andres Pardo, the head analyst at financial services holding company Corp. Financiera Colombiana, known as Corficolombiana. Yields on the government’s peso bonds will fall below 7 percent by the end of 2012, he said.

Colombia will grow 4.8 percent in 2012, compared with 5 percent in 2011, according to Pardo.

The South American country plans to sell yen-denominated bonds next year as part of an effort “to diversify its investor base,” Arce said. The government last sold bonds in Japan in 2009, when it issued 45 billion yen ($587 million) of 10-year bonds to yield 2.42 percent.

Arce also said Colombia has no plans to repatriate dollar funds held abroad.

Echeverry said in April that the government would create an overseas fund with as much as $1.2 billion from dollars bought in the local market through the end of 2011 in a bid to ease the peso’s rally earlier this year. Arce declined to say how much the government has bought so far.

“Those dollars are for our funding needs abroad,” Arce said.

Colombia has $900 million of 10 percent dollar bonds due in January 2012.

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