Articles

Tuesday, January 21, 2014

Colombia joins Em bond bonanza

Colombia on tuesday became the latest country to tap the market’s ferocious demand for emerging market debt after it successfully sold $2bn of 30 year bonds abroad.

The issue, priced to yield 5.647 per cent, attracted some $4.2bn in orders.

“The appetite of investors for our bonds reflects the great confidence that exists in Colombia’s economy,” tweeted Mauricio Cárdenas, the finance minister.

Cárdenas added that the bond’s coupon of 5.625 per cent is the lowest ever issued by Colombia on a 30-year note.

“It was oversubscribed, the rate was good,” says Rupert Stebbings, managing director of equity sales and research for Bancolombia in Medellín. 

“Once again, this demonstrates that foreigners have confidence in the Colombian market.”

“Confidence”, as both men say, is certainly at the heart of any Colombian recent investment, as over the past decade the Andean country has been reaping the benefits of high commodity prices, an improved security situation and macroeconomic credibility.

Although the times of rip-roaring annual growth rates of above 6 per cent are gone, the finance ministry reckons the economy grew 4.5 per cent last year, and is eyeing a 4.7 expansion this year (although some analysts are slightly less optimistic and expect a 4.4 per cent).

The success of the Colombian bond offer (whose size was bumped up from $1.5bn due to the strong demand) underscores how the relatively low rates on US and UK bonds are continuing to drive return hungry institutional investors into EM debt.

Indeed, for all the talk (most recently from the World Bank and the IMF) about how the US Federal Reserve’s plans to “taper” its asset purchase programme could potentially lead to fresh turmoil in emerging markets, EM global bond sales are having their best start on record.

Issuance has already hit $51.2bn so far this year. 

That is 61 per cent more that what was sold at this stage last year.

Mexico’s Pemex, Poland, Indonesia and the Philippines are among those that have rushed to the market to take advantage of the still cheap borrowing costs in recent weeks.

According to Régis Chatellier at Société Générale, EM dollar denominated bonds have registered a positive return (+0.92% for the EMBI index) so far this year even as Emfx has lost 1.45% (-1.24% for the Gbi Em local bond index).

No comments:

Post a Comment

Thanks for your visit, hope you enjoy the content, we expect to see you again soon.