Costa Rica: Rise in Bond Yields in Colones

Yields on long-term bonds in colones today showed a strong rebound, reflecting expectations of higher interest rates.

Friday, February 14, 2014

Long term debt securities in colones traded in the secondary market had a significant rebound today, an adjustment which, according to the same market, was expected due to the lower U.S. dollar liquidity and the increase in rates in that currency.

"The secondary market this afternoon gave a first sign that investors are demanding higher returns in colones, since one of the long-term bonds of the Government suffered a sharp drop in the price, or, what amounts to the same thing, a surprise rise in its interest rate.

This refers to the bond maturing on June 28, 2023, which suffered from a cut in price of more than 500 basis points and the interest rate rose to 10%.

"That's a signal that has been awaited for days, a movement of local interest rates because of the adjusting liquidity in the U.S. and internal conditions such as the fiscal deficit," said Villalobos Vidal, analyst at the Portfolio Advisory Group at Scotiabank to Elfinancierocr.com . "

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