Tuesday, 6 January 2009

Colombia to Sell Bonds Too (Update)

The Colombian government boosted its bond issuance from $500 million to $1 billion, a source told us. The securities will yield 7.5 percent (or 5 percentage points above Treasury debt of similar maturity.) Colombia, as some of you may know, risks facing funding problems by the end of this year as its exports plunge due to the U.S. recession, and the current account deficit narrows at a slower pace than expected. We will try to obtain more details on the sale later on.

Pricing is expected today. The bonds will mature in March 2019. The Colombians hired Barclays Plc. of the U.K. and New York-based bank Morgan Stanley to handle the sale. Brazil is also seeking to tap markets today with an offering of $1 billion in ten-year bonds. It is likely that both nations complete the sales -- the indication is that there is a small recovery in investor risk appetite. Dresdner Kleinwort said in a report yesterday that the recessive scenario may lure investors to currency markets in Brazil and other high-yielding emerging market countries (like Colombia.)

A bit more of background here: ING analyst David Spegel said in a report last month that he forecasts emerging market bond sales to rise more than two-thirds in 2009 because of growing current account and fiscal deficits that have to be financed and the need to have dollar funds at a moment exports are dropping fast.

1 comment:

  1. In all, I think a very smart move. Not only do the Zils and the Juan Valdezes, who've been cutting their foreign debt exposure during the recently defunct commodities boom, get to sell nice long-term 10-year debt pretty cheap, the Chinese and Japanese, and even Brazilians and Colombians with cash, can avoid putting more of their eggs in the U.S. basket. Who'd want to buy U.S. debt at negative real rates anyway.

    Important to note that the Brazilian release focused heavily on how they plan to sell their issue in Asia.

    My question moving forward is this. Who is going to want to finance Obama's expected tax cuts and stimulous plans with rates so low? How far will rates have to rise to get money flowing to the U.S. and what cost will that have on efforts to get consumers BORROWING and spending again.

    It seems to me the Brazil, Colombia sales are another little silver lining in the cloud while they also underline the serious situation facing the U.S.

    Congrats on your blog.

    The Carioca Grouch

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