Colombia’s 10-year bond yield rose above 13% on 6 October, pushing the country to the top tier of emerging-market 10-year bond underperformance. The move left Colombia ahead of Brazil, whose 10-year yield was around 12.7%.
Bloomberg was cited for placing Colombia sustained second in the region for higher 10-year bond rates before a reversal in recent weeks. The latest turn was linked partly to Colombia’s fiscal crisis and partly to the revaluation of Brazilian assets after the weekend electoral contest.
Regional underperformance rankings
The region’s ranking for the most devalued 10-year bonds listed Lebanon as the most underperforming, with a 39.9% underperformance rate. Turkey followed with 32,690%, while Egypt recorded 21,010% and Nigeria 16,297%.
Ghana’s figure stood at 14,670%, followed by Colombia at 13,001%. Pakistan came in at 12,549%, Mexico at 9,438%, and South Africa at 9,035%, according to the percentages stated in the report.
Fiscal adjustment debate resurfaces
In parallel, the fiscal backdrop featured prominently in the discussion around Colombia’s bonds. The report said CARF presented its September report to the Congress of the Republic in recent weeks, setting out differences from the Hacienda view on the scale and feasibility of an adjustment.
CARF estimated a fiscal deficit of 7.8% of GDP for the close of the year, compared with Hacienda’s 7.2% projection. The divergence centred on the gap between scenarios for an adjustment of preventively blocked funding, with the “cartera” proposing $21,7 billones and CARF viewing only a $9,7 billones cut as feasible, equal to 0.4% of GDP.
The CARF explanation quoted in the report said that the portion of the preventively blocked $21,7 billones that could become lower spending in the second semester would amount to a cut plausible at COP 12,0 billones lower. For 2027, Hacienda projected the deficit would rise from 4.5% to 9.4% of GDP, while CARF estimated a total deficit of 9.5% of GDP.
Related: Colombia 10-year bond yield hits 12.7 percent
Source: CARF
