In its first foray into the international debt market this year, Colombia is issuing additional bonds with maturity dates in 2035 and 2053, building on an initial offering from November. These bonds, aimed at financing social initiatives in line with the country's ESG commitments, originally raised $2.5 billion with interest rates set at 8% and 8.75%. This move comes amidst a backdrop of S&P Global Ratings downgrading Colombia's credit outlook to negative in January, citing concerns over enduring low investor confidence that could hamper economic growth.
The administration under President Gustavo Petro has recently taken significant steps to exert influence over the private sector, including taking control of one of the country's largest health insurers. This action reflects the government's broader strategy to directly intervene in the economy as attempts to pass reforms through congress face obstacles.
On Wednesday, Colombian bonds experienced a downturn, leading the decline in an emerging-market government bond index and becoming one of the year's poorest performers with a 3.6% loss to investors, in contrast to a 1.3% loss for its peers. However, a series of junk-rated countries, such as Brazil, Turkey, and the Ivory Coast, have successfully issued debt internationally this year, encouraged by the decreasing volatility in U.S. interest rates and anticipation of rate cuts by the Federal Reserve.
Investor demand for Colombia's foreign debt has seen a reduction in the risk premium to 291 basis points over comparable U.S. Treasuries, marking a nearly 100 basis point decrease over the past year. Deutsche Bank Securities and Santander are overseeing the bond issuance process.
