The Colombian government is looking to issue bonds with a 100-year duration, capitalizing on strong long-term economic outlook to finance the ongoing deficit, Colombia’s finance minister reported in US news-wire Bloomberg on Thursday.
The sale would be carried out by US multinational investment banking firm Goldman Sachs, who did the same for Mexico in 2010.
In the face of a rising budget deficit, Colombia aims to take advantage of robust demand for its longer-maturity debt as its economy grows at twice the regional average of its Latin American neighbors, according to Bloomberg.
Colombia’s government announced their plan to issue more bonds to fund a higher-than-predicted fiscal deficit in the national budget, reported international news-wire, Reuters on Monday.
MORE: Colombia’s government to issue more bonds to finance increasing deficit in 2014
Yields on Colombia’s long-term bonds of 30-years plunged unexpectedly low, almost 0.7%, since their issue in January, said a Bloomberg report.
Appetite for Colombian assets
“Appetite for Colombia’s last bond sale was huge, and that shows there definitely is willingness to invest in the country,” Mario Castro, a strategist at Nomura Holdings Inc. reportedly told Bloomberg.
It would require an interest in Colombian assets and strong confidence in its economy for investors to purchase bonds of such maturity.
“Exclusive club” of countries selling 100-year bonds
According to Castro, selling a 100-year bond would be “another step in positioning Colombia in the international capital market. It’s an exclusive club.”
The statement coincides with a number of positive indicators for Colombia’s economy, notably the unexpected jump in first-quarter growth figures released on Thursday, despite the central bank’s recent interest rate hikes.
MORE: Colombia economy grew 6.4% in Q1: Statistics agency
Governments borrow money by way of issuing bonds, which are known to be one of the most secure forms of investment. The more confidence in a country’s economy, the more likely investors will take on a bond of longer maturity or lower “yield,” which refers to the interest governments pay to their investors.
Sources
- Goldman Sachs’ 100-Year Bond Pitch Captivates Colombia (Bloomberg)
- Mexico Raises $1.66 Billion With First 100-Year Bond in Pounds (Bloomberg)
