Through the operation, the government seeks to lower borrowing costs and reduce the ratio of debt to gross domestic product. — Bloomberg
BOGOTA: Colombia is announcing that it will repurchase some of its outstanding global bonds with cash, as it looks to revamp its financing strategy amid increasing concerns about the widening budget deficit.
Some sovereign bonds leaped to a high for the year on the news.
The cash tender offer seeks to repurchase global notes maturing in 2030, 2031, 2032, 2041, 2042, 2044, 2045, 2049, 2051 and 2061, the government said in a statement.
The offer is not conditioned upon any minimum participation in any of the series.
The move was expected after the Finance Ministry said last month that it planned to secure up to US$10bil in bank loans denominated in Swiss francs, and use the proceeds to buy back some of the more discounted maturities.
Through the operation, the government seeks to lower borrowing costs and reduce the ratio of debt to gross domestic product.
Still, there has been no announcement on the bank loans to date.
“Despite some question marks on the size of the buyback and the ultimate financing source, this should be a positive technical anchor for the Colombia eurobond curve,” said Jason Keene, a strategist at Barclays. “We would not be surprised to hear some loan announcements in the coming days.”
Colombian bonds were among the best performing in emerging markets on Monday, with notes maturing in 2061 up 1.6 US cents on the dollar to trade at 56.4 cents, the highest since December, according to indicative pricing data compiled by Bloomberg.
The impact of the news may be limited though, said Pedro Quintanilla-Dieck, a strategist at UBS.
“While this approach should continue to support longer-dated bonds and may modestly lower sovereign funding costs in dollars, we do not expect it to materially alter the upward trajectory of the debt burden, particularly as the latest data continue to point to higher financial deficits,” he said.
Last week, Colombia’s government approved an increase in the 2026 primary deficit to 2% of gross domestic product (GDP) from a previous target of 1.4% of GDP.
The overall deficit, which includes debt repayments, remained unaltered at 7.1% of GDP.
The change will make it more difficult to resume the financial rule in 2028, which is temporarily suspended due to higher spending pressures, according to an independent committee that oversees the nation’s fiscal accounts.
Colombia has said it plans to tap international markets once this year and twice in 2026, aiming to raise approximately five billion euros.
The spreads on the country’s debt look attractive, said Soeren Moerch, a portfolio manager at Danske Bank, who has built up a large position as he bets on a shift to more market-friendly policies following next year’s presidential elections.
“The buy-back is a brave experiment,” Moerch said.
“But in a country that has very solid institutions, it would trade at much tighter spreads with more prudent fiscal policies.” — Bloomberg
