Following recent successful dollar bond sales by Mexico and Paraguay, there are celebrations in Colombia as well: on Tuesday, the Andean country sold $1bn of 10-year bonds abroad. The offer was three times oversubscribed.

The paper was sold to yield 88 basis points over comparable US Treasuries, or 2.7 per cent a year – the lowest yield ever in Colombia’s “history in the international capital markets,” according to the finance ministry.

“Coherence in political economy has a high dividend. Colombia pays one of the lowest interest rates in the global context,” the country’s finance minister, Mauricio Cárdenas, tweeted from the World Economic Forum in Davos, pointing out that, a decade ago, Colombia was paying interest on similar debt of 11 per cent a year.

Cárdenas joy was echoed locally. “In the current global scenario, there is a lot of appetite for Colombia,” Alejandro Reyes a senior trader with Ultrabursátiles in Bogotá, told beyondbrics. “This was a very good issuance, lightning a very good signal.”

This was the first dollar offering this year, kicking off a programme of overseas sovereign bond sales worth $2.6bn in 2013.

For those worried about an influx of US dollars pushing up the value of the Colombian peso, one of the world’s biggest gainers against the dollar last year, the government made it clear it would not bring home any dollars from global bond sales this year.

“They will use it to service debt; the behaviour of the country’s public debt has been very favourable,” Reyes said, adding: “besides, everything related to the currency is painful right now, so anything they would do to ease the appreciation of the currency would be wise.”

But there is appetite for public as well as for private paper coming from one of the region’s darlings. The same day Banco Davivienda, Colombia’s third-biggest bank by assets, also sold bonds abroad: $500m of five-year notes to yield 2.25 per cent. The sale was 10 times oversubscribed.

“Davivienda will use the proceeds of the issuance of the notes (together with existing cash and cash equivalents) to pay for general corporate purposes,” Fitch Ratings said in a note to investors.

That makes sense. After all, last month Davivienda went on a shopping spree and paid $800m for some of HSBC’s assets in Central America



Source: Financial Times – Beyond BRICS

Web Site:
http://blogs.ft.com/beyond-brics/2013/01/23/colombia-joins-latam-bond-bonanza/#ixzz2LSgJvjbf


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