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Colombia Bond Yields Fall as Interest Rates Attract Investors

Colombia’s peso bond yields fell for a seventh day to a record low amid increased appetite for the country’s assets as investors search for higher returns.

The yield on the government’s 10 percent peso-denominated bonds due in July 2024 fell one basis point, or 0.01 percentage point, to 6.10 percent, according to the central bank, the lowest level since the debt was first sold in 2009. The price rose 0.135 centavo to 132.044 centavos per peso.

Interest rates near zero in the U.S. and Europe compare to Colombia’s overnight borrowing costs of 4.75 percent. The country’s annual inflation was 3.08 percent in September, within the central bank’s 2 percent to 4 percent target.

“Colombia is attractive as an investment destination,” said Eduardo Bolanos, an analyst at Asesores en Valores brokerage in Bogota. “In real terms, there is still room for gains, especially in the long end of the curve.”

A tax bill sent to Congress last week looks to reduce taxes foreigners pay on profits on fixed-income investments -- which includes government peso bonds sold in the local market and corporate debt -- to 12.5 percent from the current 33 percent. The government can decree an increase to 25 percent for a specific period when it deems it appropriate, according to the text of the bill.

The proposal is also helping gains in the local bonds as investors bet it will help reduce the spread with peso-linked government bonds sold abroad, known as Global TES, said Pedro Ospina, an analyst at Interbolsa, the nation’s biggest brokerage.

“You obviously need to wait for the bill to pass, but if it does, this should narrow the spread,” said Ospina.

The gap between Colombia’s local bonds due May 2022 and the Global TES due April 2021 fell to a record low of 166 basis points today, down from 293 basis points on July 9.

The peso fell 0.3 percent to 1,799.15 per U.S. dollar, paring its gain this year to 7.8 percent.

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