Public Debt Management and Financing Planssiteresources.worldbank.org/FINANCIALSECTOR/Resources/Colombia.pdf · •Placement in the market through Dutch auction •Only for Entities

March 2014

Source: Deputy Directorate of Local Debt – Ministry of Finance and Public Credit (March 2014)

Local debt and annual growth

175,35

8,2%

0%

10%

20%

30%

40%

50%

60%

0

20

40

60

80

100

120

140

160

180

200

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014*

Gro

wth

%

Trilli

on

CO

P

• Placement in the market through Dutch auction

• Only for Entities of the Primary Dealers Program

• It is carried out each business week

Auctions

• Voluntary long-term TES allocation by Public Entities, other than

those of national jurisdiction that form the NGB

• They trade with their excess liquidity coming from managing their

resources and funds

• The rate at which they trade is based on market conditions

Agreed

• Mandatory long-term TES allocation by Public Entities of National

order, encompassed in the National General Budget (NGB)

• Public Entities are obligated to buy TES with excess liquidity

coming from managing their resources and funds

• The rate at which they trade is based on market conditions

Mandatory

TES Placement Scheme

0

5

10

15

20

25

30

35

2008 2009 2010 2011 2012 2013

Trilli

on

CO

P

Auctions Agreed Mandatory

Year Auctions Agreed Mandatory

2008 48% 35% 17%

2009 42% 12% 46%

2010 30% 54% 16%

2011 60% 14% 26%

2012 64% 8% 28%

2013 65% 14% 21%

TES placement mechanism participation

Source: Deputy Directorate of Local Debt - Ministry of Finance and Public Credit (December 2013)

8,2%

5,84

0

1

2

3

4

5

6

7

0%

5%

10%

15%

20%

25%

Ja

n-0

0

Ju

l-0

0

Ja

n-0

1

Ju

l-0

1

Ja

n-0

2

Ju

l-0

2

Ja

n-0

3

Ju

l-0

3

Ja

n-0

4

Ju

l-0

4

Ja

n-0

5

Ju

l-0

5

Ja

n-0

6

Ju

l-0

6

Ja

n-0

7

Ju

l-0

7

Ja

n-0

8

Ju

l-0

8

Ja

n-0

9

Ju

l-0

9

Ja

n-1

0

Ju

l-1

0

Ja

n-1

1

Ju

l-1

1

Ja

n-1

2

Ju

l-1

2

Ja

n-1

3

Ju

l-1

3

Average coupon ATM (right axis)

Source: Deputy Directorate of Local Debt – Ministry of Finance and Public Credit (February 2014)

Average coupon vs. ATM


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014

*

TES Issuance 11.4 13.1 13.4 13.4 16.3 28 23.4 19.1 23.9 25.8 27.69 29.4 25.3 29 30.3

Amortizations 5.2 6.8 6.1 6.2 8.4 8.5 14.6 15.6 14.6 11.4 11.4 12.8 15.1 16.9718.35

R-O 120%117%125%113%107%167% 96% 71% 94% 113%123%114% 90% 96% 95%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

0

5

10

15

20

25

30

35

Trilli

on

CO

P

In 2014 for each COP $100 of debt service provided to investors, Government will

issue COP$95 in domestic debt

Rollover Index – TES Issuance vs. Debt Service

4

6

8

10

12

14

16

3 years 5 years 10 years 15 years


Primary Market yields


Bid-to-cover ratio

2.69

0

1

2

3

4

5

6

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

Mill

ion

CO

P

SOLD DEMAND BID/COVER (right-axis)


Secondary market yields

4

6

8

10

12

14

16

3 Years 5 Years 10 Years 15 Years

5.18

6.58

7.17

7.74

3.9

4.4

4.9

5.4

5.9

6.4

6.9

7.4

7.9Primary Market Yields 2012-2014

3 Years 5 Years 10 Years 15 Years


Turnover Index

2,59%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Central Bank (DCV)

- Only for PDP participants - All registered investor - Upper bound for negotiated volumes

- Counterparty limits - Open market

Settlement

- Undisclosed transaction

for trading and settlement

- Undisclosed transaction

for trading but not for

settlement

- Undisclosed transaction for

settlement but no for trading

Secondary Market

Electronic Trading Platforms (ETP) Registered

Electronic Trading System (SEN) Colombian Electronic Market (MEC) OTC

- No upper bound for

negotiated volumes

- Managed by the Central

Bank (BanRep)

- Managed by the Colombian Stock

Exchange (BVC)

Spot or forward transactions, repos and simultaneous operations

Tier 1 (B2B) Tier 2 (B2C)

Offer Bid

Bid Amount Offer Amount

Last

Yield

Ticker

Auctions

9 Banks

2 Brokerage

Houses

Issuer Custodian Market

2 Financial

Corporation

Long-term auctions

Short-term auctions

Weighted Duration

20% SEN

80%

MEC

20%

Weighted Duration

35% 25 pictures

SEN

Randomly taken every

day along the yield curve

On-the-run and UVR TES are

predominant

40% 5%

100%

Primary Market

Secondary Market

Screen Score

Liquidity operations

• To obtain at least 4.5% of the amount

placed through auctions in the first

round

• To quote bid and ask during 70% of

the market session with maximum

spread

Primary Market

Auctions

Secondary Market

Quotes

OBJETIVE: To achieve the required

financing at an affordable cost

BENCHMARKS : COP 5, 10 and 15 years;

UVR: 5, 10 and 20 years COP

SINGLE BOND MATURING EACH YEAR:

COP Bonds will mature every even year,

while UVR Bonds will mature on odd years

TRANSPARENCY AND PREDICTABILITY:

By sticking to a clear rule on primary market

offerings and re-openings

Plazo 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

5 20192019 -

20202020 2022 2022 2025 2025 2026 2026 2028 2028 2030 2030 2032 2032

10 2024 2024 2026 2026 2028 2028 2030 2030 2032 2032 2034 2034 2036 2036 2038

15 2028 2030 2030 2032 2032 2034 2034 2036 2036 2038 2038 2040 2040 2042 2042

Plazo 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033

5 2019 2019 2021 2021 2023 2023 2025 2025 2027 2027 2029 2029 2031 2031 2033 2033 2035 2035 2037 2037

10 2021 2025 2025 2027 2027 2029 2029 2031 2031 2033 2033 2035 2035 2037 2037 2039 2039 2041 2041 2043

20 2033 2033 2035 2035 2037 2037 2039 2039 2041 2041 2043 2043 2045 2045 2047 2047 2049 2049 2051 2051

CO

PU

VR

• The fixed rate TES curve exhibits some distortions in some of its

references

• Large positions by some stakeholders in certain references generate

squeezes in the liquidity and secondary market pricing of the bond.

To try to mitigate the

impact of these

distortions the MoF can

act as lender of last

resort by creating a SLF

Issuance Decree

• Authorizes annual issuance of TES Bonds

PD Program Resolution

• Sets rules related to Primary Dealer Program

TES Resolution

• Sets conditions and characteristics of TES Bonds

PD Appointment Resolution

• Designates Primary Dealers (PD) and Candidates (PDC)

28.3%

21.8%

8.4%

6.2% 7.0%

28.2%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Aug

-10

Oct

-10

Dec

-10

Feb

-11

Apr

-11

Jun-

11

Aug

-11

Oct

-11

Dec

-11

Feb

-12

Apr

-12

Jun-

12

Aug

-12

Oct

-12

Dec

-12

Feb

-13

Apr

-13

Jun-

13

Aug

-13

Oct

-13

Dec

-13

Feb

-14

Pension Funds Commercial Banks Other Private Sector

Other Financial Sector Foreign Capital Funds Public


TES Holders


International investor and TES portfolio participation 6,82%

0%

1%

2%

3%

4%

5%

6%

7%

0

2,000

4,000

6,000

8,000

10,000

12,000

Ja

n-1

0

Apr-

10

Ju

l-1

0

Oct-

10

Ja

n-1

1

Apr-

11

Ju

l-1

1

Oct-

11

Ja

n-1

2

Apr-

12

Ju

l-1

2

Oct-

12

Ja

n-1

3

Apr-

13

Ju

l-1

3

Oct-

13

Ja

n-1

4

Bil

lio

ns

CO

P

Foreign Capital Foreign TES Holdings Participation

8

259

0

50

100

150

200

250

300

Ja

n-1

0

Apr-

10

Ju

l-1

0

Oct-

10

Ja

n-1

1

Apr-

11

Ju

l-1

1

Oct-

11

Ja

n-1

2

Apr-

12

Ju

l-1

2

Oct-

12

Ja

n-1

3

Apr-

13

Ju

l-1

3

Oct-

13

Ja

n-1

4

Foreign Capital Funds

www.irc.gov.co

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Documents

Public Debt Management and Financing Planssiteresources.worldbank.org/FINANCIALSECTOR/Resources/Colombia.pdf · •Placement in the market through Dutch auction •Only for Entities