Colombia tests debt market after losing investment grade

Colombia went to international markets for the first time since losing its investment grade.

The nation is selling more of its dollar bonds due in 2049, with an initial price guide of about 5.4%, according to a person familiar with the matter, who asked not to be identified because he is not authorized to speak about it. . It’s a key test for Colombia, where violent protests and an initially failed tax reform this year triggered its credit rating downgraded to speculative.

“It’s a good time” to sell, said William Snead, a strategist at BBVA in New York. “In the future, news about tapering could increase the volatility of US Treasury rates. They hit the market on a day when there seems to be a risk-seeking mood ”.

The operation takes place one day after the minutes of a meeting of the Federal Reserve will reveal a commitment to begin reducing asset purchases in the coming months. Colombia has taken advantage of low interest rates in the US to meet its financing needs.

After selling a net US $ 1.6 billion in bonds in the foreign market in January and US $ 3 billion in April, the country has between US $ 750 million and US $ 1 billion in international debt offerings for this year, said last month the director of Public Credit, César Arias.

Investors will be interested to see how the sale fares after S&P Global Ratings and Fitch Ratings downgraded the country to BB + in May and July, respectively. While the downgrade forced the nation’s debt to be sold, Snead said valuations look attractive at current levels.

The country’s economy is recovering strongly after last year’s recession and the central bank expects it to grow 8.6% this year, the fastest pace in at least 50 years. The government expects the fiscal deficit to widen to 8.6% of GDP this year, from 2.5% before the pandemic.

The operation is led by BNP Paribas, BBVA and Goldman Sachs.