Bloomberg News

Colombia Bonds Rise on Liquidity Boost After Interbolsa Collapse

November 07, 2012

Colombia’s peso bonds advanced, pushing yields down the most in two weeks, as the central bank moved to bolster liquidity after the collapse of Interbolsa SA’s brokerage.

The yield on the government’s 10 percent peso-denominated bonds due in July 2024 dropped seven basis points, or 0.07 percentage point, to 6.18 percent, according to the central bank. The currency slid 0.1 percent to 1,812.88 per U.S. dollar, paring its rally this year to 6.9 percent.

Colombia’s central bank offered today 300 billion pesos ($165 million) in 14-day repurchase agreements, accepting securities including corporate bonds as collateral. The announcement came as the government said today it will liquidate Interbolsa’s brokerage, the country’s biggest, after it failed to meet a loan payment last week.

“The news on Interbolsa led to concern we’d see a liquidity squeeze in the market,” said Munir Jalil, the chief economist at Citigroup Inc.’s Colombia unit. “The central bank is sending a clear signal it is ready to offer liquidity, helping especially brokerages that had reduced access through the previous rules.”

The repurchase agreements can be backed by securities including government peso bonds known as TES, corporate bonds and debt issued by Banco de la Republica, the central bank said in a statement on its website.

The repos are being sold to provide liquidity to brokerages and will be maintained “indefinitely for as long as we consider necessary,” Hernando Vargas, a central bank official, told reporters in Bogota.

Suspended Trading

Regulators suspended trading in Interbolsa shares last week and seized its brokerage after it was unable to meet a payment on a 20 billion peso loan.

Chief Financial Regulator Gerardo Hernandez said yesterday Bancolombia took over the brokerage’s trading of government bonds to avoid disruptions of the local debt market.

The decision to liquidate the brokerage was taken to protect the market and the economy’s stability after its “viability came into question and there was lack of confidence from market players that provide liquidity to Interbolsa,” Finance Minister Mauricio Cardenas told reporters today.

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

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


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