Colombia’s Peso Declines as Dubai Debt Concerns Hurt Demand

By Andrea Jaramillo

Nov. 26 (Bloomberg) -- Colombia’s peso declined as Dubai’s proposal to delay debt payments spurred concern about emerging markets and reduced demand for higher-yielding assets.

The peso fell 0.3 percent to 1,981.05 per U.S. dollar at 2:15 p.m. New York time, from 1,974.45 yesterday. With U.S. markets closed today for the Thanksgiving holiday, Colombia’s currency and bonds trade in the so-called next-day market, in which payment and delivery are made the following trading day.

Dubai World, with $59 billion of liabilities, sought a “standstill” agreement from creditors, triggering risk of the biggest sovereign default since Argentina halted payments on $95 billion of bonds in 2001. The cost of protecting government notes across the Persian Gulf rose, extending the steepest increase since February.

“That’s definitely a shock to the credit markets,” said Andres Pardo, head analyst at Corporacion Financiera Colombiana SA. “That uncertainty added to the lack of liquidity in markets because of the U.S. holiday is hurting demand.”

The yield on the Colombia’s 11 percent benchmark bonds due in July 2020 rose five basis points, or 0.05 percentage point, to 7.92 percent, according to Colombia’s stock exchange.

The Finance Ministry yesterday announced plans to carry out a debt swap this week to extend the maturities of its local debt while taking advantage of lower borrowing costs. The central bank on Nov. 23 unexpectedly reduced the overnight lending rate to a record low of 3.5 percent, which pushed the yield on the government’s benchmark bonds due in 2020 to a three-year low.

Colombia Debt Swap

The government will offer investors fixed-rate bonds due in July 2024 and new April 2013 and June 2016 notes in exchange for inflation-linked and fixed-rate debt maturing between 2010 and 2018. Investors have until today to tender their debt and results will be announced tomorrow.

In Chile, the peso slipped 0.3 percent to 494.55 per dollar, from 493 yesterday. The yield for a basket of Chile’s 10-year peso bonds in inflation-linked currency units, called unidades de fomento, fell one basis point to 3.29 percent, according to Bloomberg composite prices.

Argentina’s peso climbed 0.1 percent to 3.7986 per dollar from 3.8030 yesterday. The yield on the country’s inflation- linked peso bonds due in 2033 rose 25 basis points to 10.77 percent, according to Citibank Argentina.

Peru’s sol declined 0.4 percent to 2.8945 per dollar, from 2.8825 yesterday. The yield on Peru’s 8.6 percent sol- denominated bond due August 2017 was little changed at 5.01 percent, according to Bloomberg prices.

Venezuela’s bolivar slid 0.9 percent to 5.50 per dollar in unregulated parallel market trading from 5.45 yesterday, traders said. Venezuelans buy dollars in the parallel market when they can’t get government authorization to purchase them at the official exchange rate of 2.15 per dollar.