Colombia to shuffle Tes bond allocations

Colombia will hold off on any further overseas bond sales until next year and instead shift the remaining $300 million it had planned to sell in international markets into local bond sales, a senior Finance Ministry official said. 

Maria Fernanda Suarez, Colombia's director of public credit, said that the balance of the $2 billion scheduled for sale on Wall Street this year would be turned into peso-denominated treasury bonds, Tes, and sold to state entities, which by law are obliged to invest in the securities with their excess liquidity. 

"We won't issue any more external debt this year but we will complete the financial plan with a reassignment to state entities," Suarez said of the sales, known as forced operations, in an interview on thursday. 

The formal announcement will likely come within the next two weeks.

In more financial housekeeping, the ministry may need to increase the allocation of Tes to state entities next year, too, as they have more excess liquidity than expected, Suarez said, a move that may reduce the quantity sold to investors at auction. 

"The amount of forced operations in the 2.013 financial plan is significantly less than we will end up providing in 2.012, so we have to revise to make sure the numbers are as close as possible," she said. 

"I think that as far as internal debt is concerned, we could expect to see a readjustment between the different internal sources," Suarez said. 

The Finance Ministry has said that in 2.013 it plans to issue 28 trillion pesos ($15.4 billion) of Tes, of which 23 trillion will be sold at auction, 2 trillion pesos sold in forced operations to state entities, and 3 trillion pesos in agreed sales to state holdings. 

Next year's Tes movements would be revealed in December when the ministry usually makes adjustments to its financing plan, said Suarez, who manages the financing strategy of Latin America's fourth biggest economy. 

Analysts expect any reduction in Tes auctions would boost their price. 

"Undoubtedly, this should boost the value because there would be less (Tes) available in the market because the quantity sold at auction would be reduced," said Carmen Elena Salcedo, a fixed income analyst at Corficolombiana. 

"It also would help diversify the portfolios of investors who are concentrated in Tes. 

The tendency should be toward private debt and other types of assets," Salcedo said. 

The government in august also changed its Tes allocation, cutting auctions, so state entities could invest excess resources usually additional funds from the sale of goods and services, as well as the failure to make budgeted investments. 

Suarez, a former senior banker and pension fund executive, said the Finance Ministry does not plan to prefinance next year's budget. 

She said the yield on long-term bonds should come down about 100 basis points. 

The rate on the benchmark Tes bond, which matures in July 2.024, is at 6.2 percent, close to its record low. 

Colombia has benefited in recent years from a flood of investment interest as gains against marxist rebels and right wing paramilitaries have made the Andean nation much safer for business. 

Investment in its burgeoning capital markets has soared over the last decade and foreign direct investment, mostly in the oil and mining industries, has reached record levels. 

The $330 billion economy could attract as much as $17 billion in foreign direct investment this year, up from about $2 billion in 2.002. 

The flood of foreign investment has helped make Colombia's peso currency one of the strongest worldwide, prompting the central bank and government to purchase dollars to help stem the gains. 

A strong peso hurts exporters and also some manufacturers who earn in dollars but pay costs and wages in pesos. 

Suarez reiterated that the treasury has enough cash to continue purchasing dollars if necessary. 

She ruled out any imminent sale of yen-denominated Samurai bonds in the Asian market. 

But she said her recent trip to Singapore, Japan and Hong Kong had been very well received and interest in investing in Colombian securities was strong. 

"I'd say that in the next six months we won't issue" the Samurai bonds, Suarez said. 

Colombia has been waiting for some time for the right moment to issue debt in Asia but is holding off until the cost of placing such bonds comes down and to make sure the Finance Ministry has the right mix of market diversification, Suarez said. 

There is an impressive appetite for Colombia, she said. "everyone wants to hear about Colombia." 

But she added : an excess of diversification is bad,If we issue in samurai we have to sacrifice issues in the dollar denominated market, and I can't put at risk the liquidity in that market to diversify financing sources."