Franklin Templeton led a record sale of Colombian local bonds by foreign investors in September, fueling a slump in the notes that has outpaced all other emerging-market sovereign debt declines after Turkey in the past three months.
(Bloomberg) — Franklin Templeton led a record sale of Colombian local bonds by foreign investors in September, fueling a slump in the notes that has outpaced all other emerging-market sovereign debt declines after Turkey in the past three months.
Funds managed by the California-based investment firm sold a net 1.2 trillion pesos ($284 million) of the Andean nation’s peso-denominated and inflation-linked notes, known as TES, bringing total sales by foreigners to 4.3 trillion pesos.
September was the fifth consecutive month of net Colombian bond sales by foreign investors, a trend that has put the steep gains in the notes earlier in the year into reverse. The debt has returned a negative 6% in three months, slashing the gain this year to 12.5% — still way above the 4% average return in an index of emerging markets tracked by Bloomberg — as many investors choose to take profit.
“Foreign funds have sold Colombian bonds as they have been taking profits,” said David Cubides, chief economist at Alianza Valores. The peso’s gains, which make the securities more expensive in dollar terms, makes these less attractive to overseas investors, he said.
The Colombian peso has advanced 15% this year, outperforming emerging and advanced currencies.
Among the other foreign investors that sold Colombian debt last month were the government and central bank of Singapore, the Canadian pension fund Caisse de depot et placement du Quebec, and Japan’s government pension investment fund, according to data from the Comproller’s Office obtained by Bloomberg. The outflow of foreign capital was the largest since records began in 2010.
Pension Funds
The drop in bonds would have been worse if local pension funds hadn’t stepped in to fill the gap, said Jose Ignacio Lopez, chief economist at Corficolombiana SA.
Those funds have bought the equivalent of $6.4 billion in the notes this year, increasing their share this year to 28.5%. Foreign firms held 22% last month, down almost 6 percentage points from September 2022.
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