Colombia Yields Fall to Record After Debt Auction

Colombia’s peso bond yields fell to a record low after the government sold new fixed-income securities due in April 2028.

The yield on 10 percent peso-denominated debt due in July 2024 dropped seven basis points, or 0.07 percentage point, to 5.52 percent at the close in Bogota, the lowest since the securities were first issued in 2009, according to the central bank. The price rose 0.687 centavo to 137.427 centavos per peso.

Colombia sold the new 15-year notes to yield 5.789 percent, the Finance Ministry said in a statement. Investor demand for the securities totaled 2.31 trillion pesos ($1.3 billion), four times the 500 billion pesos of debt offered, according to the statement.

“The bonds were sold at a low yield, and that is pushing down the rest of the curve,” Alejandro Reyes, the head analyst at Ultrabursatiles SA brokerage, said in a telephone interview. “There’s a lot of liquidity and inflation is low, so there’s a lot of appetite for these bonds.”

Colombia is planning to offer 500 billion pesos worth of 6 percent bonds due in April 2028 at each of three weekly auctions starting with the one today, according to two participants in a conference call yesterday with ministry officials. They asked not to be identified because the discussions are private.

The ministry will offer new 5.25 percent bonds due in November 2018 in three weekly auctions of 500 billion pesos each starting Feb. 6, according to the two people. The ministry didn’t immediately return a telephone message seeking comment on debt sale plans.

Peso Gains

The peso appreciated 0.1 percent to 1,768.73 per U.S. dollar. The currency touched 1,750.50 on Jan. 2, the strongest intraday level since July 2011.

Central bank Governor Jose Dario Uribe said that day on RCN Radio that the strength of the peso is a concern and reiterated that Banco de la Republica will buy a minimum of $20 million a day through at least the first quarter. The central bank printed pesos to buy a record $4.4 billion last year.

Expectations that foreign investment in Colombia will continue to rise is driving gains in the peso, according to Reyes. More portfolio investment will flow into the Andean country after Colombian lawmakers passed last month a bill to cut taxes on foreigners’ bond profits to 14 percent from 33 percent, he said.

The difference between yields on locally issued TES notes due in 2024 and similar-maturity peso notes sold on international markets fell six basis points to a record low 1.31 percentage points today.

Before it's here, it's on the Bloomberg Terminal.