BOGOTA May 2 Colombian companies are preparing a wave of bond sales, jumping at the opportunity to borrow at lower cost after J.P. Morgan's decision to boost the Andean nation's debt in its indexes drew an influx of foreign cash into its financial markets.
Corporate issuers had been sidelined from the local capital market due to a broad rise in interest rates, as investors expected the U.S. Federal Reserve to reduce economic stimulus measures and raise borrowing costs.
But J.P. Morgan's decision to boost its weighting of Colombian government debt from the end of May prompted a surge of foreign investment that drove down yields on peso-denominated 2024 TES government bonds by around 100 points, the lowest in 10 months.
Seven companies look set to seize the opportunity to borrow at lower cost after four months that saw barely any debt issuance activity - just 640 billion pesos ($332.4 million) in two issues, according to data from Bogota's stock exchange.
"This could be the best moment to issue, the curve of TES is an indicator for many other investment curves and the change in J.P. Morgan's weighting is already well priced in," said Carlos Ramos, a fixed income analyst at Corficolombiana.
J.P. Morgan's heavier bond weighting is expected to draw an additional $4 billion to $10 billion into Colombia's bond and stock markets this year and next according to analysts.
Compounding the slide in yields is the imminent maturity of 13.2 trillion pesos ($6.83 billion) of TES bonds, most but not all of which will be re-invested into fresh government bonds while some of the remainder snaps up new corporate debt.
Lead managers consulted by Reuters expect at least seven debt issuances in the local market through the end of this year, totaling at least 5 trillion pesos, at least three of which will be launched in May.
"It's a very good moment, because the expectation of a fall in yields, especially in longer-term bonds, gives private debt issuers an opportunity ... to go to the market at more attractive rates," said Milena Franco, analyst at Acciones y Valores brokers.
The three issuances expected this month are 700 billion pesos from the GrupoSura holding which has authorization to sell up to 1.3 trillion pesos, between 500 billion and one trillion from financial conglomerate Davivienda and 850 billion pesos from power utility Emgesa.
Davivienda's issue could be bigger still, given it plans to issue up to two trillion pesos in bonds this year.
Other issues later in the year could come from state-run oil company Ecopetrol, the financial conglomerate Sociedades Bolivar, Banco de Occidente and the financial firm Bancamia.