Bloomberg News

Colombia Ditches Overseas Bond Sale on ‘Wild’ Market Conditions

September 26, 2011

Sept. 26 (Bloomberg) -- Colombia has scrapped plans to sell $240 million in international bonds this year as “wild” market conditions raise the risk of borrowing abroad, Finance Minister Juan Carlos Echeverry said.

Colombia planned to raise the additional amount after selling $2 billion of 10-year dollar bonds in July and has said that it could issue Samurai bonds in Asia in the second half of the year. Under its 2011 financing plan, Colombia planned to raise $2.24 billion in debt sales abroad.

“We don’t like wild waters,” Echeverry said in a Sept. 24 interview in Washington, where he was attending the meetings of the International Monetary Fund. “We were lucky and very successful when we placed $2 billion in a 10-year bond and we don’t need more financing, so why tackle the markets now?”

The worsening European debt crisis and threat of a U.S. recession led Russia and companies including state oil producer Petroleos Mexicanos to scrap plans for debt sales this month. Average borrowing costs for companies in emerging markets have risen 70 basis points in September, poised for their biggest monthly advance since October 2008, a month after the collapse of Lehman Brothers Holdings Inc. ignited the global credit crisis. Average yields on government debt in developing nations have climbed 109 basis points, also the most in any month since October 2008, according to JPMorgan Chase & Co. data.

Spreads Rising

Colombia’s sale of the dollar bonds July 5 was the nation’s first international debt issue since winning an investment-grade rating in March. The country sold the 4.375 percent bonds due 2021 to yield 130 basis points, or 1.3 percentage points, more than similar-maturity U.S. Treasuries.

Since the sale, the spread has risen 120 basis points, or 1.2 percentage points, to 252 basis points over U.S. Treasuries, according to JPMorgan Chase & Co.’s EMBI Global Index for Colombia. Since Aug. 31, the yield on the dollar bonds has risen 43 basis points to 4.127 percent.

Echeverry also echoed comments in Washington by Colombian central bank Governor Jose Dario Uribe in welcoming the depreciation of the peso against the U.S. dollar since the end of July. Echeverry said the recent fall in the currency had taken it to around its equilibrium level and said he hopes it won’t keep falling.

The peso weakened 4 percent to 1903.94 per dollar this week as investors dumped emerging market assets on signs the world recovery was faltering. Even after the recent decline, the peso remains the only major currency in Latin America except Peru’s sol to have gained ground on the greenback this year.

“Let’s hope it doesn’t go any further,” Echeverry said. “Right now, the current level, I am happy with that. Something around 1900 is ok.”

--With assistance from Andrea Jaramillo, Blake Schmidt and Heather Walsh in Bogota. Editors: Joshua Goodman

To contact the reporters on this story: Fabiola Moura in Washington at fdemoura@bloomberg.net; Matthew Bristow in Washington at Mbristow5@bloomberg.net;

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net


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