Colombia Bond Yields Fall Near 3-Week Low on Europe Optimism

Colombia’s peso bonds rose, pushing yields near a three-week low, as optimism Europe will contain its sovereign debt crisis boosted demand for higher-yielding, emerging-market assets.

The yield on Colombia’s benchmark 10 percent bonds due in July 2.024 fell two basis points, or 0.02 percentage point, to 7.47 percent. 

It fell to 7.46 percent on Oct. 10, its lowest level on a closing basis since Sept. 20. 

The bond’s price rose 0.135 centavo today to 120.320 centavos per peso.

Global stocks rose and emerging-market currencies gained as the European Union released a road map of its plans to recapitalize banks and halt the region’s debt crisis. 

European Commission President Jose Barroso called for a “coordinated approach” to recapitalize the region’s banks as well as the payout of a sixth loan to Greece and a faster start for a permanent rescue fund to master Europe’s debt woes.

“Local markets have a high correlation with what is happening abroad, and in that sense volatility should continue,” said Pedro Ospina, a bond analyst at Interbolsa SA, the nation’s biggest brokerage. 

“There’s still no clarity on what will happen to Europe, but markets today are driven by the hope the crisis will be contained.”

Colombia may pare next year’s local bond auction plan as faster economic growth bolsters tax revenue and reduces the government’s financing needs, Public Credit Director German Arce said in an interview yesterday.

Government Financing Program

The government will announce new figures for its 2.012 financing program in December, Arce said. 

A reduction would be the second this year after Finance Minister Juan Carlos Echeverry trimmed last month the planned offerings to 18.6 trillion pesos ($9.8 billion) from an initial 20 trillion pesos after a debt swap lowered financing needs.

“If there are any surprises, these will be positive in fiscal terms,” Arce said.

Local peso bonds, known as TES, will gain should Colombia trim issuance plans further, according to Ospina.

“A lower supply should help TES,” said Ospina. 

“As uncertainty in the external market falls, local assets will again be driven by Colombia’s fundamentals. 

For now, though, we’re very tied to movements in external markets.”

The peso rose 1 percent to 1,896 per U.S. dollar, from 1,914.75 yesterday. 

It has dropped 4 percent in the past month.