Bloomberg News

Colombia Peso Bond Yields Fall for Second Day on Budget Deficit

February 02, 2012

Feb. 2 (Bloomberg) -- Colombia’s peso bonds rose, pushing yields on benchmark securities lower for a second day, after last year’s budget deficit was below prior government estimates.

The yield on the government’s 9.25 percent peso bonds due May 2014 fell three basis points, or 0.03 percentage point, to 6.13 percent, according to the central bank. The bond’s price rose 0.0570 centavo to 106.3980 centavos per peso.

Colombia’s consolidated budget deficit, which includes states, municipalities and state-run companies, was 2.2 percent of gross domestic product last year, compared with the government’s December estimate of 2.9 percent as strong economic growth boosts tax revenue, Finance Minister Juan Carlos Echeverry said yesterday.

“At a time when other countries are struggling with high deficits and liquidity problems, Colombia’s story is the total opposite,” said Julian Cardenas, head analyst at ING Pensiones y Cesantias. “The local market continues to incorporate good news.”

Quickening economic growth and rising foreign direct investment are bolstering tax revenue and reducing the government’s financing needs. Tax revenue surged 25 percent in 2011 to 83.7 trillion pesos ($46.7 billion) from a year ago, Echeverry said.

The Andean country suspended auctions of short-term notes, known as TCOs, for the first half of 2012 as increased cash holdings reduced the need for liquidity, Echeverry said yesterday. The government in June will decide if it carries out the auctions in the second half of the year, he said.

Ecopetrol Refinery

This year the government targets a consolidated budget deficit of 1.8 percent of GDP and a central government budget deficit of 2.8 percent of GDP, down from 2.9 percent in 2011, Echeverry said.

The peso climbed 0.3 percent to 1,793.88 per U.S. dollar, from 1,799.63 yesterday. Earlier it touched 1,789.43, its strongest level since Sept. 8. The currency has gained 8.1 percent this year.

Ecopetrol SA’s second-largest refinery will begin tapping a loan from the U.S. Export-Import Bank as part of a plan to borrow $922 million this month to more than double capacity by 2014. Reficar, as the Cartagena, Colombia-based refinery is known, this month will use a portion of the $2.8 billion loan approved last year as it builds facilities to increase production of diesel and other fuels, company Chief Executive Orlando Cabrales said today in an interview.

The news helped gains in the peso, according to Julian Marquez, an analyst at Interbolsa SA, Colombia’s largest brokerage.

“Ecopetrol is a big player,” Marquez said. “The market is always wondering whether they are bringing in money or not.”

--With assistance from Heather Walsh in Cartagena. Editor: Glenn J. Kalinoski

To contact the reporter on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net

To contact the editors responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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