Goldman Sachs 100-Year Bond Pitch Captivates ColombiaAndrea Jaramillo
After helping Mexico sell 100-year bonds overseas for the first time in 2010, Goldman Sachs Group Inc. is seeking to do the same for Colombia.
The Andean nation may issue the notes later this year after the New York-based bank offered to arrange the sale, Finance Minister Mauricio Cardenas said June 11. Goldman Sachs helped underwrite Mexico’s offering of dollar bonds due 2110 as well as its pound-denominated century bonds in March.
Colombia is seeking to exploit soaring demand for its longer-maturity debt as its economy grows twice as fast as the regional average and the Federal Reserve reiterates that interest rates will stay low for a “considerable time” after it stops buying bonds. Yields on Colombia’s $2 billion of bonds due in 2044, its longest-term notes, have plunged 0.67 percentage point to 4.98 percent since they were issued Jan. 21. That’s more than the average 0.48 percentage point decline in long-dated bonds with the same rating.
“Colombia shines in the midst of underperforming economies in emerging markets, and investors are noticing,” Mario Castro, a strategist at Nomura Holdings Inc, said by phone from New York. “There’s no doubt there’s appetite for Colombia risk, and Colombia would be getting long-term financing at still very low yields.”
Goldman Sachs didn’t answer calls and messages seeking comment.
Colombia would use funds from a sale to cover its 2015 financing needs, Cardenas told investors at the June 11 presentation. Goldman Sachs proposed a reference yield of around 5.7 percent for a Colombian 100-year debt offering, he said.
Yields on Mexico’s $2.68 billion of bonds due 2110 have fallen 0.67 percentage point this year to 5.55 percent, data compiled by Bloomberg show.
Mexico, whose BBB+ rating from Standard & Poor’s is one level higher than Colombia’s, is the only nation to have issued 100-year notes in both dollars and pounds. China and the central bank of the Philippines sold $100 million of century bonds in 1996 and 1997, respectively.
“There has been a general receptiveness to longer maturities recently,” Michael Roche, an emerging-market strategist at Seaport Group LLC, said by telephone from New York. “Institutional investors, particularly pension funds and insurance companies, generally have a need for longer duration.”
Colombia’s economy will grow 4.5 percent this year, compared with an average expansion of 2.7 percent in Latin America, according to the median forecast in a Bloomberg survey. The economy expanded 6.4 percent in the first quarter from a year earlier, the national statistics agency said today, higher than the 5.2 percent median estimate in a Bloomberg survey.
The peso advanced 0.4 percent to 1,882.50 per dollar at the close today in Bogota.
The country’s sale of 30-year bonds in January attracted $4.2 billion in bids, according to the government.
The government plans $3 billion in overseas debt offerings next year.
“Appetite for Colombia’s last bond sale was huge, and that shows there definitely is willingness to invest in the country,” said Nomura’s Castro. Selling a century bond would be “another step in positioning Colombia in the international capital market. It’s an exclusive club.”