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LMOs: The Activity After Debt
Republic of Colombia
Ministry of Finance and Public Credit
Washington D.C., October 24 / 2018
Liability Management Activity
3735 32
3539
44 45 46 46 44 43 4139
10
20
30
40
50
60
70
80
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
3
Colombia has a sound debt structure
Internal68%
External32%
USD26%
EUR4%
JPY0%
UVR (COP)20%
COP50%
Debt Currency Composition
Debt by Issuance MarketCG Gross Debt (%of GDP)
Debt by Type of Rate
88,5%
Source: Ministry of Finance and Public Credit. As of
23/10/2018
GDP 2018: USD 340 billion
Fixed Rate 89%
Floating Rate 11%
0%
2%
4%
6%
8%
10%
12%
14%
16%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16-31
Years to Maturity
2010 2014 2018 Goal Limit
4
The Republic has been active in the liability management front
Evolution of the CG Debt Profile(yearly maturity as % of Total Debt)
Source: Ministry of Finance and Public Credit. As of
23/10/2018
5
Fiscal accounting has imposed restrictions to LMOs specially after the
implementation of the fiscal rule in 2012
Source: Ministry of Finance and Public Credit.
-2.4
-2.3 -2.3 -2.2 -2.2
-1.9 -1.9-1.8
-1.7
-1.3
-1.0 -1.0 -1.0
-2.3
-2.3-2.4
-3.0
-4.0
-3.6
-3.1
-2.4-2.2
-1.8
-1.4-1.3
-1.2
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Structural Balance
Total Balance
Fiscal Balance Targets of the Central Government(as % of GDP)
6
Most of the recent LMOs in the local market have been done with public
sector entities and the National Treasury
Source: Ministry of Finance and Public Credit.
Liability Management Transactions in the Local Market
% o
f Int
erna
lDeb
tat E
xecu
tion
4.2%
0.3%
1.2%
6.4%
2.2%
3.0%
1.3%
4.1%
0%
1%
2%
3%
4%
5%
6%
7%
0
2
4
6
8
10
12
14
2011 2012 2013 2014 2015 2016 2017 2018
Tril
lion
CO
P
LM Public Sector Entities LM Market %LM / Total Internal Debt
-7.0
-6.0
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2030 2032 2033 2035 2049
7
Early in October the government executed a bond exchange for COP 12.8
trillion / USD 4.2 billion
Effect of the October/18 exchange on the Local TES maturity profile
CO
P T
rillio
n
Source: Ministry of Finance and Public Credit.
8
The local TES market has evolved significantly since 2014
26.26%
16.76%
7.12%
6.77%
25.47%
17.62%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Pension Funds Commercial Banks Rest of the Private Sector
Rest of the Financial Sector Foreign Funds Public Sector
TES Holders by Type(% of Total TES)
Source: Ministry of Finance and Public Credit. As of
30/09/2018
9
The change in the bondholder structure has been a positive factor for the
improvement in the maturity profile
0% 10% 20% 30% 40% 50%
1 a 3 años
3 a 5 años
5 a 7 años
7 +
2018 2012
Years to Maturity(% of Total TES)
0 10 20 30 40 50 60 70 80 90
2012
Commercial Banks (2018)
2012
Pension Funds (2018)
2012
Foreign Funds (2018)
2012
Rest of the Financial Sector…
2012
Rest of the Private Sector (2018)
2012
Public Sector (2018)
1y - 3y 3y - 5y 5y - 7y 7 +
Maturity by Type of Holder(COP Trillion)
Source: Ministry of Finance and Public Credit. As of
19/10/2018
-
-
-
10
The rally in rates between 2016 and 2018 contributed to a cost-efficient
extension
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
10.00%
1Y 2Y 4Y 6Y 8Y 10Y 12Y 15Y
2014 2015 2016 2017 2018
7.10%
4.25%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
Dec-13 Dec-14 Dec-15 Dec-16 Dec-17
COLTES 2028 Central Bank´s Rate
Source: Ministry of Finance and Public Credit. As of
23/10/2018
TES 10yr
Local Fixed Rate TES Curve Yield TES 2028 and Central Bank Rate
11
The government achieved a dual reduction in refinancing risks and cost of
debt
Source: Ministry of Finance and Public Credit. As of
30/09/2018
6.9 Yrs
7.30%
4%
5%
6%
7%
8%
9%
10%
4
5
6
7
8
9
Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 Oct-13 Jul-14 Apr-15 Jan-16 Oct-16 Jul-17 Apr-18
Average Life (Years) vs Average Coupon (%)
Internal Debt Average Life Internal Debt Average Coupon (%)
12
LM in international markets has been less frequent as maturities are lower
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
CG Debt Portfolio Amortizations (USD million)
External Debt Internal Debt
Source: Ministry of Finance and Public Credit. As of
23/10/2018
13
Colombia reopened the Latam sovereign market in October with a prefunding
exercise and a tender offer for bonds maturing in 2019
Source: Ministry of Finance and Public Credit
110
115
120
125
130
9/22/2018 10/2/2018 10/12/2018 10/22/2018
127
Launch
Colombia CDS 5y
Type Dual Tranche + Tender Offer
Bond 4.5% due 2029 5% due 15, 2045
Issue Size USD1.5 billion USD 0.5 billion
Issuance Spread T+140 T+185
Issuance Yield 4.578% 5.184%
Demand USD 9.7 billion
Bonds subject to repurchase 7.375% due March 2019
Amount accepted for repurchase USD 1 bllion
Terms of the Transaction
What’s Next?
15
Colombia has conducted the 5 year review of its medium term debt strategy
New Stochastic Debt Model,with WB and IDB technicalsupport.
2013
2018 - I
2018 - II
…
InstitutionalArrangements
Institutional arrangements fordeveloping Debt ManagementStrategy.Implementation of DebtManagement Committee andTechnical Debt Group.
2019
Debt Model
16
The strategy has been successful so far but some more work can be done
Central Government Amortization Profile(USD Million)
Source: Ministry of Finance and Public Credit. As of
23/10/2018
0
2
4
6
8
10
12
14
16
2019
2020
202
1
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
204
6
2047
2048
2049
205
0
8% LImit 10 LImit
2018
2020
2022
0%
2%
4%
6%
8%
10%
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44
Ann
ualC
once
ntra
tion
Years to Maturity
LMOs will be relevant for a convergence towards the new target
Projected Central Government Amortization Profile(% of Total Debt)
Source: Ministry of Finance and Public Credit.
6.2
6.66.4
6.76.6
6.7
7.5
8.4 8.2 8.2
8.99.2 9.1 9.1 9.2
6.0
6.5
7.0
7.5
8.0
8.5
9.0
9.5
10.0
10.5
11.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Colombia should be able to maintain its average life indicator at sound levels
even under adverse macroeconomic conditions
Central Government Average Life(Years)
Source: Ministry of Finance and Public Credit
3.50
4.00
4.50
5.00
5.50
6.00
6.50
7.00
7.50
8.00
Oct-18 Nov-18 Sep-19 Jul-20 May-22 Jul-24 Nov-25 Aug-26 Apr-28 Sep-30 Jun-32
Spot
Having dealt with short term maturities Colombia can be more tactical and
focus also on curve efficiency objectives
Fixed Rate TES Curve (% yield)
Source: Ministry of Finance and Public Credit. Curve
as of 22/10/2018
The exposure to interest rate risk is low but the floating EUR portfolio could be
hedged
Euribor 6m vs EUR Swap 5y and 10y
Source: Bloomberg. Curves as of 22/10/2018
0.98
0.37
-0.27
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 Oct-13 Jul-14 Apr-15 Jan-16 Oct-16 Jul-17 Apr-18
Swap EUR 10Y (vs 6M) Swap EUR 5Y (vs 6M) EURIBOR 6M
Gracias!