Market Intelligence

Colombia explores its first 30-year fixed-rate Treasury bond

Reuters

By Paul Kilby

NEW YORK, April 13 (IFR) - Colombia is considering issuing a 30-year fixed-rate local currency bond for the first time ever - a move that could also lure foreign investors, finance officials told IFR.

The country's finance team took the opportunity to float the concept among the buyside in the US, where it has been attending the International Monetary Fund's Spring meetings in Washington.

For example, the yield on the country's 2034 TES is now trading at around 6.93% after initially being priced in January at 7.25%.

Colombia has already covered its hard currency funding needs for this year after garnering a total of US$4bn through two issues - one in October and the other in January.

It is also ahead of schedule in the local market, where it has attended to 40% of its needs this year, allowing to move at a slower pace going into the rest of 2019, Arias said.

The idea would be to issue a 30-year local law bond with the same characteristics as other instruments in the TES market, except that the bond would be sold through a bookbuilding process rather than a local auction.

"Launching such an instrument through a weekly auction would be challenging," Arias said.

"So what we are thinking is to use the syndication process, the typical book building process, so that both domestic and external investors would be able to participate."

While Colombia has inflation-linked notes that mature 2048, its fixed-rate Treasury curve only extends out to 15 years.

"This is positive for the government and the development of the capital markets internally," said Arias. "It also gives a price reference for corporates, banks and other issuers in Colombia.

The ministry of finance has yet to decide whether to mandate banks to run such a deal or leave it up to local primary dealers, some of which are foreign institutions.

Either way, Colombia faces what some bankers are describing as some of the best conditions that the region's borrowers have enjoyed in years after the Federal Reserve dug further into dovish territory earlier this year.

This has been reflected in part by the recent appearance of the first crossborder local currency trades from Latin American corporates in over a year.

Two Peruvian names - Telefonica del Peru and Alicorp - both issued sol-denominated debt this month with decent demand from foreigners. Colombian corporates have also long been keen to do the same, say bankers.

"The idea has been well received and there is a bid for duration currently from investors, " said Arias about the prospects of a 30-year fixed-rate bond.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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